Have you heard the news? An Event Study on the Market Impact of CSRD Announcements on Firm Stock Prices
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2025-07-02
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en
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This study investigates how the EU’s Corporate Sustainability Reporting Directive (CSRD), which for the first time mandates corporate sustainability disclosures for all (listed) firms, including mid- and small-caps, has impacted stock valuations around three pivotal announcement dates of the directive. Grounded in the Efficient Market Hypothesis (EMH) and viewed through a signaling-theory lens, an event study is conducted on 596 EU-listed firms, using daily returns from 2019 to 2023 to calculate cumulative abnormal returns (CARs) over 11-day, 5-day, and 3-day windows around each event. Cross-sectional regression results reveal a marginally significant negative average CAR (–0.45%, p = .053) for the 3-day window. However, hypothesized moderators tied to an industry’s environmental, social, and governance (ESG) exposure, firm size, and ESG governance strength did not significantly affect immediate reactions. Conversely, higher return on assets (ROA) and greater trade openness explain most variation in CARs, suggesting that more profitable firms with are better able to manage the anticipated compliance costs ‘in the eyes of the beholder’, whereas greater trade openness is associated with more pronounced negative reactions, implying that firms in open economies face international exposure and likely supply-chain complexities that heighten the perceived cost of compliance with the CSRD.
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Faculteit der Managementwetenschappen