The impact of sustainability disclosure on financial statement value relevance: evidence from Europe

Kyriakos Christofi, Alexios Kythreotis, Pieris Chourides, Milad Soltani and Zhou Di

International Journal of Business and Emerging Markets, 2025, vol. 17, issue 5, 1-22

Abstract: The contemporary business environment, where environmental sustainability and corporate social responsibility are at the heart of modern businesses, calls for empirical investigations into how organisations capitalise on their sustainable performance. Despite the proliferation of sustainability metrics, there is a gap in when it comes to understanding their influence on the financial statement value relevance, which is what this paper seeks to examine. By using multiple regression analyses on panel data, this study investigates how sustainability disclosure and performance affects the value relevance of financial statements in European stock exchanges for a period of ten consecutive fiscal years. The results indicate that companies voluntarily disclosing sustainability performance demonstrate higher value relevance compared to those that do not disclose such information. Further, the study reveals that superior sustainability performance also leads to greater value relevance than for companies reporting lower sustainability scores. Therefore, this paper highlights the importance of sustainability disclosure and performance on creating financial statement value relevance.

Keywords: environmental, social and governance; ESG; value relevance; financial reporting; strategic management. (search for similar items in EconPapers)
Date: 2025
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