This project complements previous empirical research on the study of sustainability, market and risk-adjusted performance by employing to date unused data.
Sustainability provides opportunities for producers to lower costs, for entrepreneurs and investors to increase profit; and therefore should have an impact on the market performance. Whether sustainability has an impact on market and risk-adjusted performance is examined using three indexes - the Dow Jones Sustainability World Index, the Dow Jones Global Index and the Dow Jones Global Total Stock Market Index. As the most sustainable companies from the Dow Jones Global Stock Market Index are included in the Dow Jones Sustainability World Index, it is expected that the index with more sustainable companies would show a better market and risk-adjusted performance.
The study`s results provide no evidence that there is a generic business case for sustainability. The insignificant, slightly higher performance of DJSIW seems to come with additional volatility and risk, as this index shows the lowest Sharpe Ratio of the three indexes. The study indicates that companies with remarkable sustainable development strategies are not more likely to be rewarded by investors with a higher valuation in the financial markets and do not show a better risk-adjusted performance.
Table of Contents
Chapter 1: Overview
1.1. Definitions
1.2. Problem Statement
1.3. Purpose
1.4. Significance of the Study
1.5. Nature of the Study
1.6. Research Questions and Hypotheses
1.6.1. Research question 1.
1.6.2. Hypothesis 1 (1H): return.
1.6.3. Research question 2.
1.6.4. Hypothesis 2 (2H): return.
1.6.6. Research question 3.
1.6.7. Hypothesis 3 (3H): risk.
1.6.8. Research question 4.
1.6.9. Hypothesis 4 (4H): risk.
1.7. Variables
1.8. Theoretical Framework
1.9. Scope and Limitations
Chapter 2: Foundations of Project Design
2.1. Literature Review
2.2. Research Design
2.3. Sampling Methods and Procedures
2.3.1. Population.
2.3.2. Data collection methodology.
2.4. Validity
2.4.1. External validity.
2.4.2. Instrument reliability.
2.5. Methodology Appropriateness
2.6. Collection of Data
2.7. Analysis of Data
Chapter 3: Action Plan
3.1. Hypothesis 1
3.1.1. Descriptive and graphical analysis.
3.2. Hypothesis 2
3.3. Hypothesis 3
3.3.1. Descriptive and graphical analysis.
3.4. Hypothesis 4
Chapter 4: Discussions and Conclusions
4.1. Conclusions about the Research Questions
4.2. Conclusions from Data Analysis
4.3. Hypotheses & Null Hypothesis
4.4. Research Benefits
4.5. Recommendations and Conclusions
4.6. Future Research Suggestions
Objectives & Core Topics
This thesis examines whether companies with a high sustainability score exhibit better market and risk-adjusted performance by comparing the Dow Jones Sustainability World Index (DJSIW) with broader market indices (DJGI and DJGTSM) using quantitative, longitudinal analysis of data from 2004 to 2012.
- Analysis of market performance differences between sustainable and less sustainable companies.
- Evaluation of risk-adjusted performance using the Sharpe Ratio.
- Application of statistical analysis of variance (ANOVA) to index returns.
- Exploration of the "business case" for corporate sustainability.
- Assessment of index performance data over an eight-year observation period.
Excerpt from the Book
1.2. Problem Statement
Although global competition is rising, technology is changing fast and the world just faced a serious economic downturn (OECD, 2013: nominal percentage change from previous year of the gross domestic product within the OECD countries between 1988 and 1998 was 8%, between 1999 and 2009 it turned down to 4.5% and between 2010 and 2013 there is 3.5%), there seems to be little reason for business leaders to deal in a sustainable way (Lacy, et al., 2010). According to Lacy, et al. (2010) the main problems that drive sustainability are lack of education, climate change, scarcity and health issues and they point out that one of the reasons for this situation is the difficulty to calculate the contribution in companies towards sustainability. As long as it is difficult to associate the market performance or investment risk in a direct relationship to sustainability, investors are supposed not to value sustainable behavior (Pava & Krausz, 1996) and unsustainable behavior like destructive pollution and wasting will continue.
Summary of Chapters
Chapter 1: Overview: This chapter introduces the concept of sustainable development, defines key terms, and outlines the research purpose, questions, and hypotheses regarding sustainability and company performance.
Chapter 2: Foundations of Project Design: This chapter provides a literature review of the relationship between corporate sustainability and financial performance, and describes the quantitative research design and methodology used.
Chapter 3: Action Plan: This chapter presents the data collection and conducts descriptive and statistical analysis of the performance and risk-adjusted metrics for the chosen indices.
Chapter 4: Discussions and Conclusions: This chapter synthesizes the research results, evaluates the stated hypotheses against the findings, and offers recommendations and suggestions for future research.
Keywords
Corporate Sustainability, Market Performance, Risk-Adjusted Performance, Sharpe Ratio, DJSIW, DJGI, DJGTSM, Financial Performance, Sustainability Index, ANOVA, Statistical Analysis, Investment Returns, Corporate Social Responsibility, Sustainable Development, Quantitative Research
Frequently Asked Questions
What is the core focus of this research?
The research investigates whether higher corporate sustainability, as ranked by indices like the DJSIW, leads to improved market performance and better risk-adjusted returns compared to broader, less-specific indices.
What are the primary themes addressed?
The study centers on corporate sustainability (CS), corporate social responsibility (CSR), market valuation, investment risk, and the empirical link between sustainable business practices and financial outcomes.
What is the central research question?
The study aims to determine if companies included in the Dow Jones Sustainability World Index exhibit higher market and risk-adjusted performance than those in broader indices like the DJGI or DJGTSM.
Which methodology is employed to analyze the data?
The research utilizes a quantitative and technical approach, employing descriptive statistics, time-series plotting, and analysis of variance (ANOVA) to test the significance of performance differences between index groups.
What is covered in the main body of the work?
The main body includes a comprehensive literature review, the definition of corporate sustainability metrics, detailed data collection, and statistical testing of four specific hypotheses regarding index returns and Sharpe Ratios.
Which keywords best describe this study?
The study is characterized by terms such as Corporate Sustainability, Market Performance, Risk-Adjusted Performance, Sharpe Ratio, DJSIW, and statistical methods like ANOVA.
Why was the Sharpe Ratio used in this analysis?
The Sharpe Ratio was utilized to effectively evaluate risk-adjusted performance, allowing the researcher to determine if portfolio returns were the result of smart management or an acceptance of excessive risk.
What was the final conclusion regarding the business case for sustainability?
The results provided no statistically significant evidence of a generic "business case" for sustainability, as the study found no robust or persistent outperformance of the sustainable index compared to the broader market indices.
- Arbeit zitieren
- Peter Reber (Autor:in), 2013, Higher corporate sustainability improves the market and risk-adjusted performance of companies, München, GRIN Verlag, https://www.grin.com/document/943757
