Comparative analysis of environmental, social, and governance disclosures

Zabihollah Rezaee, Saeid Homayoun, Ehsan Poursoleyman and Nick J. Rezaee

Global Finance Journal, 2023, vol. 55, issue C

Abstract: We examine the level of environmental, social, and governance (ESG) sustainability disclosure by firms between two regimes where disclosure is mandatory versus voluntary. We use the regulatory environment between the United States (US) and European Union (EU) to compare ESG disclosures. Firms in the US are currently under a voluntary disclosure regime. In contrast, EU members are under a mandatory disclosure regulatory regime that began in 2017. We find that EU firms outperform US firms under voluntary disclosure requirements (2007–2016), and the ESG disclosure of EU firms further improves relative to US firms after the implementation of the mandatory disclosure in Europe in 2017. Our results suggest that the 2017 adoption of disclosure guidelines in the EU is associated with improvements in EU firms' ESG disclosure. Our results regarding the value-relevance of ESG disclosure support a move toward mandatory ESG disclosures. Results support current initiatives that have been taken by global regulators and stock exchanges in recommending and requiring globally listed companies to disclose their ESG sustainability information to portray accurate and comprehensive corporate reporting. The results further our understanding of how firms from different institutional environment settings may have disclosed their ESG practices, thus providing opportunities for future research.

Keywords: ESG disclosure; Listed firms; Disclosure guidance (search for similar items in EconPapers)
JEL-codes: E01 F18 F64 G28 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:glofin:v:55:y:2023:i:c:s1044028322001065

DOI: 10.1016/j.gfj.2022.100804

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