The Effects of Mandatory ESG Disclosure Around the World
75 Pages Posted: 26 Apr 2021 Last revised: 13 Dec 2021
Date Written: November 30, 2021
We examine the effects of mandatory ESG disclosure around the world using a novel dataset. Mandatory ESG disclosure increases the availability and quality of ESG reporting, especially among firms with low ESG performance. Mandatory ESG reporting helps to improve a firm’s financial information environment: analysts’ earnings forecasts become more accurate and less dispersed after ESG disclosure becomes mandatory. On the real side, negative ESG incidents become less likely, and stock price crash risk declines, after mandatory ESG disclosure is enacted. These findings suggest that mandatory ESG disclosure has beneficial informational and real effects.
Keywords: Sustainability reports, ESG reporting, Nonfinancial information, ESG incidents
JEL Classification: G14, G15, G18, G32, G38
Suggested Citation: Suggested Citation