An Impact of Life Cycle Sustainability on the Shareholder Value of a Firm: An Analysis of Interaction Effects

Abstract

The present paper studies the impact of life cycle sustainability of goods and services on shareholder value of the firm and further this study extends to analyse the role of interaction effects of variables on shareholder value as measured by Tobin’s q. For this purpose, 73 companies listed on Bombay Stock Exchange have been studied. Content analysis methodology has been employed to analyse the content of Business Responsibility Report given in annual reports. Further regression analysis has been conducted to study the impact of sustainable supply chain on Tobin’s q and to analyse the interaction effects. The results of the study indicate that sustainable activities related to pre-operations and society has significant positive impact on shareholder value of the firm. Further the results of interaction effects of the variables also state that interaction has significant impact on the shareholder value and the impact depends upon the nature of the control variable with which the explanatory variables interact. It has been concluded that companies must practice sustainability in supply chain in order to enjoy high shareholder value. Thus, the study bestows to the existing literature on sustainability by expanding it to the developing country like India.

Keywords: Life Cycle Sustainability, Shareholder Value, Tobin’s q, India, Interaction Effects, Supply Chain

View PDF