The Effects of Mandatory ESG Disclosure Around the World

75 Pages Posted: 26 Apr 2021 Last revised: 13 Dec 2021

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: November 30, 2021

Abstract

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

Krueger, Philipp and Sautner, Zacharias and Tang, Dragon Yongjun and Zhong, Rui, The Effects of Mandatory ESG Disclosure Around the World (November 30, 2021). 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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