The impact of mandatory ESG disclosure on firm value. Evidence from European publicly listed firms (2014-2020)
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2025-07-07
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en
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Abstract
This study analyses the influence of mandatory considerations of ESG disclosure on firm value, which considers the publicly listed firms in Europe during 2014-2020. Based on the ESG scores of LSEG as the dedicated measure of disclosure and performance, the analysis evaluates the effects of the Non-Financial Reporting Directive (NFRD) of the European Union, which was established in 2017. The analysis uses a panel regression analysis of more than 8000 firm-years with Tobin’s Q and Return on Equity (ROE) as market valuation and financial performance proxy, respectively. Results indicate no statistically significant association between ESG scores and the value or profitability of the firms. Rather, industry characteristics and firm size look more powerful. Such results point to the idea that the mandatory disclosure might not increase market valuation or short-term returns. Contributing to the argument on the regulation of ESG, the paper notes that disclosure requirements do not have a significant financial effect and that the quality of disclosures and materiality defined by the industry have a significant effect on how investors react.
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ESG, CSRD, Non-financial disclosure, firm value,, publicly licensed firms
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Faculteit der Managementwetenschappen