Inclusion On The Dow Jones Sustainability Index (North America): Implications For Market Capitalization And Stock Return

This study seeks to understand the relationship between sustainability practices (SP) and financial performance. While literature exists with conflicting conclusions, many of these studies only examine sustainability through a one-dimensional view. Additionally, much of the research linking financial performance to SP are international or foreign-based studies. Using inclusion on the Dow Jones Sustainability Index North America (DJSI), a multi-dimensional sustainability assessment tool, we analyze the relationship between corporate sustainability practices (as measured by inclusion on the DJSI) and two measures of financial performance: market capitalization and stock return. Specifically, we test whether the relationship between traditional financial accounting predictor variables (i.e. net income, long-term debt, total revenue, and basic earnings per share) and financial performance indicators (market capitalization and stock return) is different for firms included in the DJSI versus those not included.