Leveraging stakeholder engagement for market value growth: Empirical evidence on sustainable development leadership in Europe

This study analyzes the impact of sustainable development leadership on firm performance. The context of the empirical analysis is the European region between 2010 and 2018. Sustainable development leaders are defined as the firms included in the Dow Jones Sustainability Index for Europe. To control for endogeneity problems caused by self-selection bias in the sample, the research design relies on Heckman two-stage model. The results show that stock market participants do not perceive sustainability leadership as an asset that adds value to the firm. Our findings also suggest that corporate governance shapes the relationship between sustainable development leadership and performance as common-law countries have a more positive perception sustainable development leadership than civil-law countries. Additionally, the study reveals a decline in stock market sentiment toward sustainability leadership over the research period, indicating a potential loss of competitive advantage for sustainable development leaders as sustainability initiatives become more widespread.