The Consequences of Mandatory Corporate Sustainability Reporting: Evidence from Four Countries

We examine the effect of mandatory sustainability reporting on firm disclosure practices and valuation.Specifically, we explore the implications of regulations mandating the disclosure of environmental, social, and governance information in China, Denmark, Malaysia, and South Africa using differences-indifferences estimation with propensity score matched samples. We find that relative to propensity score matched control firms, treated firms significantly increased disclosure following the regulations. We also find increased propensity by treated firms to receive assurance to enhance disclosure credibility and increased propensity to adopt reporting guidelines that enhance disclosure comparability. These results suggest that even in the absence of a regulation that mandates the adoption of assurance or specific guidelines, firms seek the qualitative properties of comparability and credibility. We do not find any evidence that, on average, the disclosure regulations adversely affected shareholders. Instrumental variables regressions suggest that increases in disclosure driven by the regulation are associated with increases in firm valuations, as reflected in Tobin's Q.