Sustainability engagement in Latin America firms and cost of equity. Issue 2 (15th March 2021)

• Record Type: Journal Article
• Authors: Garzón Jiménez, Renato; Zorio-Grima, Ana
• Is Part Of: Academia. Volume 34:Issue 2(2021)
• Page Start: 224
• Page End: 243
• Publication Date: 2021-03-15
• Subjects: Corporate social responsibility -- CSR -- ESG -- Cost of equity -- Stakeholder theory; Responsabilidad social empresarial -- CSR -- Costo de capital -- Teoría de los stakeholders; Management -- Periodicals; Management -- Latin America -- Periodicals; Finance -- Periodicals; Finance -- Latin America -- Periodicals; 658.005
• DOI: 10.1108/ARLA-05-2020-0117
• Languages: English
• ISSNs: 2056-5127

Abstract

Abstract : Purpose: Corporate social responsibility (CSR) actions are expected to reduce information asymmetries and increase legitimacy among the stakeholders of the company, which consequently should have a positive impact on the financial conditions of the firm. Hence, the objective of this paper is to find empirical evidence on the negative relationship between sustainable behavior and the cost of equity, in the specific context of Latin America. To address this issue, some proxies and moderating variables for sustainability are used in our study. Design/methodology/approach: The regression model considers a sample with 252 publicly trading firms and 2, 772 firm-year observations, from 2008 to 2018. The generalized method of moments is used to avoid endogeneity problems. Findings: The study finds evidence that firms with higher environmental, social and governance activities disclosed by sustainability reports and assured by external providers decrease their cost of equity, especially if they are in an integrated market as MILA. This finding confirms that agency conflicts between firm's management and stakeholders diminish with higher CSR transparency, leading to a lower cost of capital. Originality/value: Our research is unique and valuable as, to our knowledge, it is the first study to analyze the impact of sustainable behavior and the cost of equity from companies operating in Latin America. Abstract : Propósito: Las actividades de Responsabilidad Social Empresarial permiten disminuir asimetrías de información e incrementar la legitimidad ante los stakeholders de una empresa, generando impactos positivos financieros para la misma. De hecho, el objetivo del artículo es medir la relación entre el comportamiento sostenible y el Costo de Capital en el contexto empresarial latinoamericano. Para ello, consideramos algunas variables proxy y moderadoras sustentables en nuestro estudio. Diseño/Metodología/Enfoque: El modelo considera una muestra de 252 empresas cotizadas y 2772 observaciones que abarcan el período de 2008 a 2018. Se implementa el Modelo Generalizado de Momentos para evitar problemas de endogeneidad. Resultados: Los autores evidencian que empresas con altos niveles de divulgación ambiental, social y gobernanza corporativa a través de reportes de sostenibilidad y asegurados por proveedores externos disminuyen el Costo de Capital, especialmente si cotizan en un mercado integrado como el MILA. Estos hallazgos confirman que se reduce la asimetría de información entre la gerencia y los stakeholders, dado que incrementa la transparencia mediante la Responsabilidad Social Corporativa y ello conduce a un menor Costo de Capital. Originalidad/Valor: Nuestro estudio es único dado que, hasta la fecha, es el primer estudio que analiza el impacto de la divulgación voluntaria de RSE y Costo de Capital de empresas que operan en Latinoamérica.