The price of unsustainability: An experiment with professional private equity investors

Patricia Crifo (1, 2, 3) , Vanina Forget (1, 4) , Sabrina Teyssier (5)

1 X-DEP-ECO - Département d'Économie de l'École Polytechnique
2 UPN - Université Paris Nanterre
3 CIRANO - Centre interuniversitaire de recherche en analyse des organisations
4 AgroParisTech
5 ALISS - Alimentation et sciences sociales

This paper sheds light on the impact sustainable and unsustainable corporate practices have on equity financing. We present a unique framed field experiment in which professional private equity investors competed in closed auctions to acquire fictive firms. We hence observe that corporate non-financial performance impacts firm valuation and investment decision and we quantify to which extent. Main result is an asymmetric effect, entrepreneurs having more to lose from unsustainable practices than to gain from sustainable ones. Our findings are discussed in terms of practical implications for both investors and firm managers.

Mots clés: Private Equity.; Corporate Sustainability; Equity Financing; Field Experiment; Firm Valuation; Private Equity

Domaines: Finance quantitative [q-fin.CP]

Patricia Crifo, Vanina Forget, Sabrina Teyssier. The price of unsustainability: An experiment with professional private equity investors. 2012. ⟨hal-00757203⟩