The Financially Material Effects of Mandatory Non-Financial Disclosure

Journal of Accounting Research, Forthcoming

59 Pages Posted: 10 Aug 2020 Last revised: 7 Jul 2023

See all articles by Brian Gibbons

Brian Gibbons

Oregon State University College of Business

Date Written: July 16, 2020


Complaints from institutional investors suggest that principles-based disclosure regimes that rely on financial materiality standards produce inadequate non-financial environmental and social (E&S) information. Using the staggered introduction of 40 country-level regulations that mandate disclosure, I document that reporting E&S information relates to increased investment from institutional owners and has material effects on firms’ investment and financing decisions. Firms mandated to disclose E&S information allocate more investment towards long-term, innovative projects and raise more equity capital. Evidence indicates that disclosure attracts long-term-oriented institutional clientele with E&S preferences, which then feeds back on firm decision-making. While the effects of non-financial disclosure are similar to those of improved financial disclosure, this clientele mechanism is unique. Taken together, these results suggest that jurisdictions that rely solely on financial materiality disclosure standards create non-financial information frictions with material effects on investors and firm decision-making.

Keywords: Innovation; R&D; CSR; ESG; Sustainability; Disclosure; Information asymmetry

JEL Classification: D82, G32, G38, O32, Q56

Suggested Citation

Gibbons, Brian, The Financially Material Effects of Mandatory Non-Financial Disclosure (July 16, 2020). Journal of Accounting Research, Forthcoming, Available at SSRN: or

Brian Gibbons (Contact Author)

Oregon State University College of Business ( email )

Corvallis, OR 97331
United States

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