The Effects of Mandatory ESG Disclosure Around the World

75 Pages Posted: 26 Apr 2021 Last revised: 13 Feb 2023

See all articles by Philipp Krueger

Philipp Krueger

University of Geneva - Geneva Finance Research Institute (GFRI); Swiss Finance Institute; European Corporate Governance Institute (ECGI); University of Geneva - Geneva School of Economics and Management

Zacharias Sautner

Frankfurt School of Finance & Management; European Corporate Governance Institute (ECGI)

Dragon Yongjun Tang

The University of Hong Kong - Faculty of Business and Economics

Rui Zhong

The University of Western Australia - UWA Business School

Date Written: January 27, 2023

Abstract

We compile a novel dataset on mandatory environmental, social, and governance (ESG) disclosure around the world to analyze the stock liquidity effects of such disclosure mandates. We document a significant positive effect of ESG disclosure mandates on firm-level stock liquidity. The effects are strongest if the disclosure requirements are implemented by government institutions—not on a comply-or-explain basis—and coupled with strong enforcement by informal institutions. Firms with weaker information environments benefit the most from ESG disclosure mandates. The findings are robust to different estimation methods and concerns related to the staggered introduction of the disclosure mandates. Our results support the view that ESG disclosure regulation improves the information environment and has beneficial capital market effects.

Keywords: Sustainability reports, ESG reporting, Nonfinancial information, ESG incidents

JEL Classification: G14, G15, G18, G32, G38

Suggested Citation

Krueger, Philipp and Sautner, Zacharias and Tang, Dragon Yongjun and Zhong, Rui, The Effects of Mandatory ESG Disclosure Around the World (January 27, 2023). European Corporate Governance Institute – Finance Working Paper No. 754/2021, Swiss Finance Institute Research Paper No. 21-44, Available at SSRN: https://ssrn.com/abstract=3832745 or http://dx.doi.org/10.2139/ssrn.3832745

Philipp Krueger

University of Geneva - Geneva Finance Research Institute (GFRI) ( email )

40 Boulevard du Pont d'Arve
Geneva 4, Geneva 1211
Switzerland

Swiss Finance Institute ( email )

Switzerland

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

University of Geneva - Geneva School of Economics and Management ( email )

Uni Mail
Bd du Pont-d'Arve 40
Geneva, 1211
Switzerland

Zacharias Sautner (Contact Author)

Frankfurt School of Finance & Management ( email )

Adickesallee 32-34
Frankfurt am Main, 60322
Germany

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Dragon Yongjun Tang

The University of Hong Kong - Faculty of Business and Economics ( email )

KKL 1004
Pokfulam Road
Pokfulam
Hong Kong
(852)22194321 (Phone)

Rui Zhong

The University of Western Australia - UWA Business School ( email )

35 Stirling Highway
Crawley, Western Australia 6009
Australia

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