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The Consequences of Mandatory Corporate Sustainability Reporting: Evidence from Four Countries


Ioannis Ioannou


London Business School

George Serafeim


Harvard University - Harvard Business School

August 20, 2014

Harvard Business School Research Working Paper No. 11-100

Abstract:     
We examine the effect of mandatory sustainability reporting on corporate disclosure practices. Specifically, we examine regulations mandating the disclosure of environmental, social, and governance information in China, Denmark, Malaysia, and South Africa using differences-in-differences estimation with propensity score matched samples. We find significant heterogeneity in corporate disclosure responses across those four countries. Relative to propensity score matched control firms, treated firms in China and South Africa increased disclosure significantly. We also find increased propensity to receive assurance to increase disclosure credibility in the case of South Africa, and increased propensity to adopt reporting guidelines to increase disclosure comparability in both China and South Africa. In contrast, treated firms in Denmark and Malaysia did not increase disclosure. Danish firms responded by embedding environmental and social factors in their supply chain management, and by signing on the United Nations Global Compact while Malaysian firms adopted reporting guidelines. We do not find any evidence that the disclosure regulations adversely affected shareholders. Instrumental variables regressions suggest that increases in disclosure driven by the regulation are associated with increases in firm value. Our results highlight the role of local context and institutional differences in how firms in different countries respond to reporting regulations.

Number of Pages in PDF File: 35

Keywords: sustainability reporting, mandatory reporting, corporate social responsibility, integrated reporting

JEL Classification: A13, I31, J24, J28, M00, M1, M14, M41, D82, D83, D84

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Date posted: April 3, 2011 ; Last revised: August 21, 2014

Suggested Citation

Ioannou, Ioannis and Serafeim, George, The Consequences of Mandatory Corporate Sustainability Reporting: Evidence from Four Countries (August 20, 2014). Harvard Business School Research Working Paper No. 11-100 . Available at SSRN: http://ssrn.com/abstract=1799589 or http://dx.doi.org/10.2139/ssrn.1799589

Contact Information

Ioannis Ioannou
London Business School ( email )
Sussex Place
Regent's Park
London, NW1 4SA
United Kingdom
02070008748 (Phone)
HOME PAGE: http://www.london.edu
George Serafeim (Contact Author)
Harvard University - Harvard Business School ( email )
381 Morgan Hall
Boston, MA 02163
United States
HOME PAGE: http://drfd.hbs.edu/fit/public/facultyInfo.do?facInfo=ovr&facId=15705
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