The Effect of Mandatory Non-Financial Reporting on CSR (And Environmentally Sustainable) Investment: a Discontinuity Design Approach

29 Pages Posted: 19 Nov 2021

See all articles by Leonardo Becchetti

Leonardo Becchetti

University of Rome Tor Vergata - Faculty of Economics

Sara Mancini

University of Rome Tor Vergata - Department of Economics and Finance

Nazaria Solferino

University of Rome Tor Vergata - Faculty of Economics

Date Written: November 15, 2021

Abstract

We investigate the effects of the introduction of non-financial reporting (NFR) on investment related to corporate social responsibility (CSR). We focus on environmental sustainability by using as exogenous treatment the Italian implementation of the EU Directive 2014/95 that has made NFR mandatory for companies of 500 employees and above passing threshold levels of either net sales or total assets. We estimate the causal effect on data from the ISTAT Multiscopo Survey (including the universe of middle and large sized Italian companies and a large sample of small companies) with a fuzzy discontinuity design approach and find evidence of a sharp discontinuity around the cutoff. Our empirical findings show that mandatory NFR is associated to significant positive effects on CSR investments in some crucial domains (waste management, recycle/reused material in inputs, pollution control, emission reduction). Their magnitude implies that between 20 to 30 percent of additional firms are involved in CSR investments in general and specifically in all the considered types of environmentally sustainable investment. Policy implications of our findings are that the reduction of the mandatory NFR threshold including also medium sized firms could significantly contribute to extend corporate investment in CSR and, more specifically, in environmental sustainability.

Keywords: Corporate Social Responsibility, Non-financial Reporting, Environmental Sustainability

JEL Classification: D25, D22

Suggested Citation

Becchetti, Leonardo and Mancini, Sara and Solferino, Nazaria, The Effect of Mandatory Non-Financial Reporting on CSR (And Environmentally Sustainable) Investment: a Discontinuity Design Approach (November 15, 2021). CEIS Working Paper No. 528, November 2021, Available at SSRN: https://ssrn.com/abstract=3963923 or http://dx.doi.org/10.2139/ssrn.3963923

Leonardo Becchetti (Contact Author)

University of Rome Tor Vergata - Faculty of Economics ( email )

Via Columbia, 2
I-00133 Rome
Italy

Sara Mancini

University of Rome Tor Vergata - Department of Economics and Finance ( email )

Via columbia 2
Rome, Rome 00123
Italy

Nazaria Solferino

University of Rome Tor Vergata - Faculty of Economics ( email )

Via Columbia n.2
Rome, rome 00100
Italy

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