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%0 Thesis
%A Müller, Torbjörn Anton
%T Investments in sustainability - the role of corporate social responsibility and discounting behavior
%I Rheinisch-Westfälische Technische Hochschule Aachen
%V Dissertation
%C Aachen
%M RWTH-2023-01018
%P 1 Online-Ressource : Illustrationen, Diagramme
%D 2023
%Z Veröffentlicht auf dem Publikationsserver der RWTH Aachen University
%Z Dissertation, Rheinisch-Westfälische Technische Hochschule Aachen, 2023
%X Sustainability is one of the major topics of the 21st century, and business is often believed to be able to play a large role in fostering a more sustainable development of the society. A corporation’s voluntary engagement in pursuing sustainable development is discussed under the concept of Corporate Social Responsibility (CSR). As more and more corporations have started to implement CSR strategies, research is trying to understand both the reasons for firms to do so as well as the financial consequences. The central question typically is: Is CSR engagement beneficial for shareholders, and more specifically, what are the mechanics underlying this link between shareholder value and CSR? This thesis aims to help further our understanding of how investments in sustainability are valued by the market by looking – in the first three research papers – at the consequences of a firm’s CSR engagement and – in the fourth research paper – at individual discounting behavior when confronted with investments in sustainability.Shareholder value can be affected both by a link of CSR to a firm’s financial performance and by a link to the cost of capital. While there exists a rich body of literature on the link to firms’ financial performance, the first two research papers aim to further our understanding of the link to the cost of equity capital, which has not been studied as extensively yet. In the first research paper titled “Corporate social responsibility, investor protection, and cost of equity: A cross-country comparison”, we empirically investigate the joint effects of investor protection and CSR on firm’s cost of equity. We find that CSR can reduce the cost of equity, but only in combination with effective investor protection that prevents expropriation by firm insiders. In countries with low investor protection, CSR can cause increases in a firm’s cost of equity. We also investigate the channels by which CSR relates to cost of equity, and show that in countries with strong investor protection, firms with increased CSR ratings benefit from a broader investor base, rather than reduced firm risk. In the second research paper titled “Corporate social responsibility, investor time preferences, and cost of equity”, we identify an alternative mechanism that might ensure that CSR engagement is in line with shareholder preferences: monitoring by institutional shareholders. We empirically analyze the joint effects of shareholder time preferences and CSR engagement on firms’ cost of equity and find that CSR can reduce the cost of equity when effective monitoring by patient institutional investors is provided. The monitoring mechanism is effective whenever the firms’ national institutional environment does not sufficiently protect against expropriation by firm insiders. The third research article titled “Corporate social responsibility and SEO announcement effects around the world” investigates whether CSR has an affect on the reaction of capital markets to the announcement of financing decisions, more specifically of seasoned equity offerings (SEOs). The findings suggest a positive relationship of CSR and SEO announcement effects, as firms with a good CSR performance benefit from increased trust between management and stakeholders, so that financing decisions are looked on more favorably. In the fourth research article titled “The determinants of discounting in intergenerational decision-making”, we try to shed light on the individual decision-making processes when confronted with investments in sustainability by modelling the decision in an experimental setting. More specifically, we look at discounting behavior in situations where individuals are confronted with evaluating the utility of someone else in the future, i.e., situations that involve simultaneous social and intertemporal discounting, which we call intergenerational discounting. We find that individ-uals tend to discount the utility of someone else in the future rather strongly, when compared to separate social and intertemporal discounting. Together, the four research articles take on the mission of understanding more about the mechanics of how investments in sustainability are evaluated, both on a corporate and an individual level.
%F PUB:(DE-HGF)11
%9 Dissertation / PhD Thesis
%R 10.18154/RWTH-2023-01018
%U https://publications.rwth-aachen.de/record/889197