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Sustainability engagement in Latin America firms and cost of equity

Renato Garzón Jiménez (Faculty of Economics, Universidad Católica de Santiago de Guayaquil, Guayaquil, Ecuador)
Ana Zorio-Grima (Department of Accounting, Universitat de Valencia, Valencia, Spain)

Academia Revista Latinoamericana de Administración

ISSN: 1012-8255

Article publication date: 15 March 2021

Issue publication date: 29 June 2021

600

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.

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.

Keywords

Citation

Garzón Jiménez, R. and Zorio-Grima, A. (2021), "Sustainability engagement in Latin America firms and cost of equity", Academia Revista Latinoamericana de Administración, Vol. 34 No. 2, pp. 224-243. https://doi.org/10.1108/ARLA-05-2020-0117

Publisher

:

Emerald Publishing Limited

Copyright © 2021, Emerald Publishing Limited

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