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Mandatory ESG Reporting and Corporate Performance

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Abstract

We examine the effects of mandatory ESG reporting on firms’ corporate performance. Using variation from Sweden’s size-based ESG reporting reg- ulation, which requires medium private firms to start reporting ESG infor- mation from 2017 onward, we document that mandatory ESG reporting im- proves firms’ corporate performance. This finding is consistent with two non- mutually exclusive mechanisms: (1) disclosing ESG information enlarges the opportunity set of mandated firms to enter larger supply chains, and (2) cap- ital providers incorporate ESG information in their debt pricing decisions. In addition, we document the ESG disclosure dynamics of private firms in both a voluntary and a mandatory regime. Our results withstand several robustness tests and an alternative research design. Collectively, our findings provide insights into the consequences of mandatory ESG reporting at the firm level.

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  • Vazquez, Antonio B. & Martinez, Sofia, 2022. "Mandatory ESG Reporting and Corporate Performance," Misum Working Paper Series 2022-5, Stockholm School of Economics, Mistra Center for Sustainable Markets (Misum), revised 30 Jan 2023.
    • Handle: RePEc:hhs:hamisu:2022_005
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    More about this item

    Keywords

    private firms; mandatory ESG reporting; regression discontinuity design; difference-in-differences design;
    All these keywords.

    JEL classification:

    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation

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