Review of Corporate Finance > Vol 4 > Issue 1–2

Stakeholder Orientation, Environmental Performance and Financial Benefits

Yrjo Koskinen, University of Calgary, Alberta, Canada and ECGI, Belgium, , Hao Lu, Saint Mary’s University, Canada, , Nga Nguyen, Université du Québec à Montréal, Canada,
Suggested Citation
Yrjo Koskinen, Hao Lu and Nga Nguyen (2024), "Stakeholder Orientation, Environmental Performance and Financial Benefits", Review of Corporate Finance: Vol. 4: No. 1–2, pp 89-125.

Publication Date: 18 Apr 2024
© 2024 Y. Koskinen, H. Lu and N. Nguyen
Corporate finance,  Corporate governance,  Stakeholder strategy
JEL Codes: M14, G34, O51
Environmental performancesystematic riskvaluationprofitsstakeholder orientationcorporate governance


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In this article:
Literature Review 
Endogeneity Control and Identification Strategy 
Discussion and Conclusions 
Variable descriptions 
Timeline of constituency statutes adoption in the U.S. 


In this paper, we examine the impact of stakeholder orientation on environmental performance and on financial benefits from environmental performance. We use firm-level data from Canada and the United States spanning the years 2002 to 2020 and classify all Canadian firms and those U.S. firms located in states that have passed constituency statutes as stakeholder-oriented. We first show that Canadian firms and stakeholder-oriented U.S. firms have better environmental performance than shareholder-oriented U.S. firms. We then find that good environmental performance increases profits and valuations for all firms in the U.S., but especially for shareholder-oriented firms. For Canadian firms overall there is no consistent financial impact. Moreover, the financial impact of environmental performance becomes negative for Canadian firms after the Supreme Court decision in 2008 on BCE Inc. vs. 1976 Debentureholders, stating that the duty of the board of directors is to act in the best interest of the corporation, not its shareholders. The U.S. results for valuations are robust after taking into account potential endogeneity issues using instrumental variables and dynamic panel regressions. Thus, our results suggest a trade-off between firm environmental and financial performance under different governance schemes. On the one hand, stakeholder orientation decreases financial benefits from firms’ environmental performance. On the other hand, shareholder orientation may be detrimental to the environment. This has important policy implications for the current debate on climate change mitigation.



Review of Corporate Finance, Volume 4, Issue 1–2 Special Issue on Sustainable and Climate Finance: Articles Overiew
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