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Cited by 1,530Corporate Social Responsibility ReportingEnvironmental Sustainability in BusinessCorporate Finance and Governance

Environmental risk management and the cost of capital

Sharfman, Mark P., Fernando, Chitru S.·2008·Strategic Management Journal
DOI 10.1002/smj.678
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Abstract

Our study of 267 U.S. firms shows that improved environmental risk management is associated with a lower cost of capital. Our findings provide an alternative perspective on the environmental‐economic performance relationship, which has been dominated by the view that improvements in economic performance stem from better resource utilization. Firms also benefit from improved environmental risk management through a reduction in their cost of equity capital, a shift from equity to debt financing, and higher tax benefits associated with the ability to add debt. These findings help build better theory regarding the outcomes of strategic improvements in environmental risk management. Copyright © 2008 John Wiley & Sons, Ltd.

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Crossref · 10.1002/smj.678

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  • Firms can lower their cost of capital and increase value by improving their environmental policies.

    “studies conclude that firms can lower their cost of capital and increase value by improving their environmental policies (Sharfman and Fernando 2008;Chava 2014;El Ghoul et al. 2018).”

    From The Importance of Climate Risks for Institutional Investors (2020) · cites this paper as Sharfman and Fernando 2008

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Authors
Sharfman, M. P., & Fernando, C. S.
Affiliations
University of Oklahoma (US)
Corresponding author
Sharfman, Mark P.
ORCID
Fernando, Chitru S.
Venue
Strategic Management Journal
Publisher
Wiley
Published
2008-04-11
Volume
29
Issue
6
Pages
569-592
ISSN
  • 0143-2095 (ISSN-L)
  • 1097-0266
DOI
10.1002/smj.678
OpenAlex
W2064891424
Cited by
1,530
References
5
Citations by year
2026: 115 · 2025: 184 · 2024: 160 · 2023: 162 · 2022: 161 · 2021: 128 · 2020: 106 · 2019: 81 · 2018: 73 · 2017: 62 · 2016: 58 · 2015: 63 · 2014: 41 · 2013: 41 · 2012: 34
FWCI
60.56
Type
journal article
Language
en
Open access
closed
Licence
onlinelibrary.wiley.com/termsAndConditions#vor (vor)
Locations
Strategic Management Journal (publishedVersion)
Funders
National Science Foundation
Topics
  • Social Sciences › Business, Management and Accounting › Strategy and Management › Corporate Social Responsibility Reporting
  • Social Sciences › Business, Management and Accounting › Marketing › Environmental Sustainability in Business
  • Social Sciences › Business, Management and Accounting › Accounting › Corporate Finance and Governance
Keywords
environmental risk management, cost of capital, cost of equity, debt financing, tax benefits of debt, corporate environmental performance, resource utilization (natural resources)

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