The Effect of Equity Mispricing on the Relationship of Corporate Sustainability Performance and Leverage Adjustments
Abstract
This study aims to investigate the effect of equity mispricing on the relationship between corporate sustainability performance and leverage adjustments. To achieve this purpose, the number of 178 companies has been studied from 2017 to 2022. The study's hypothesis was tested through a multivariate regression method and panel data method, utilizing Eviews 10. The findings show that corporate sustainability performance has a positive and significant effect on leverage adjustments. Also, equity mispricing has a negative and significant effect on the relationship between corporate sustainability performance and leverage adjustments. Overall, this paper highlights the important role of corporate sustainability performance in shaping corporate capital structure dynamics and suggests implications for corporate strategic planning on the optimal levels of corporate sustainability performance activities. Contrary to previous studies, this research shows that the speed of lever adjustment is heterogeneous among different companies and is determined by various factors. In addition, this study introduces a new essential non-financial element called "firm sustainability performance" that explains cross-sectional changes in the speed of leverage adjustment.
Keywords: leverage adjustments, corporate sustainability performance, equity mispricing.
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