Real Effects of a Widespread CSR Reporting Mandate: Evidence from the European Union’s CSR Directive

Fiechter, Peter; Hitz, Joerg-Markus; Lehmann, Nico

doi:10.2139/ssrn.3725603

Cited by 9 publications

(13 citation statements)

References 37 publications

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“…In a recent study, Jackson et al (2020) find that the effect of mandatory social responsibility behaviour led to a significant increase in the CSR engagement in firms operating in 24 OECD countries, although this did not translate in lower corporate irresponsibility. Similarly, a pilot study by Fiechter, Hitz, and Lehman (2020) provide evidence that EU firms increased their CSR activities immediately after the adoption of the 2014 EU NFRD, thus confirming that, at least in Europe, regulation was the right institutional answer to stakeholders' recent call for more corporate socially responsible behaviour. Specifically, the EU Parliament, adopted a mandatory 'comply or explain' approach which obliges firms to identify and justify any areas of non-compliance.…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 74%

Do ESG strategies enhance bank stability during financial turmoil? Evidence from Europe

Chiaramonte

Dreassi

Girardone

et al. 2021

The European Journal of Finance

130

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This paper investigates the joint and separate effects of Environmental (E), Social (S), and Governance (G) scores on bank stability. Using a sample of European banks operating in 21 countries over 2005-2017, we find that the total ESG score, as well as its sub-pillars, reduces bank fragility during periods of financial distress. This stabilizing effect holds strongly for banks with higher ESG ratings. These results are confirmed by a differences-in-differences (DID) analysis built around the introduction of the EU 2014 Non-Financial Reporting Directive (NFRD). Our evidence also reveals that, in times of financial turmoil, the longer the duration of ESG disclosures, the greater the benefits on stability. Finally, we show that the ESG-bank stability linkages vary significantly across banks' characteristics and operating environments. Our findings are robust to selection bias and endogeneity concerns. Overall, they support the regulatory effort in requiring an enhanced disclosure of non-financial information.

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Section: Literature Review and Hypotheses Developmentmentioning

confidence: 74%

Do ESG strategies enhance bank stability during financial turmoil? Evidence from Europe

Chiaramonte

Dreassi

Girardone

et al. 2021

The European Journal of Finance

130

View full text Add to dashboard Cite

show abstract

“…The EU Corporate Social Responsibility Directive (NFRD 2014/95/EU) requires large firms to prepare and disclose non-financial reports from fiscal year 2017 onward. Fiechter et al (2020) examine the real effects around the disclosure mandate and find that firms, on average, increase their CSR activities in response to the regulation and that they start doing so already before the mandate comes into force. The effects are stronger for firms with low levels of CSR expenditures prior to the regime change.…”

Section: Evidence On Csr-specific Real Effectsmentioning

confidence: 99%

Mandatory CSR and sustainability reporting: economic analysis and literature review

2021

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This study collates potential economic effects of mandated disclosure and reporting standards for corporate social responsibility (CSR) and sustainability topics. We first outline key features of CSR reporting. Next, we draw on relevant academic literatures in accounting, finance, economics, and management to discuss and evaluate the potential economic consequences of a requirement for CSR and sustainability reporting for U.S. firms, including effects in capital markets, on stakeholders other than investors, and on firm behavior. We also discuss issues related to the implementation and enforcement of CSR and sustainability reporting standards as well as two approaches to sustainability reporting that differ in their overarching goals and materiality standards. Our analysis yields a number of insights that are relevant for the current debate on mandatory CSR and sustainability reporting. It also points scholars to avenues for future research.

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“…Overall, the extant evidence indicates that CSR reporting regulations improve CSR performance of affected firms, which in turn generates both positive societal externalities and negative shareholder wealth effects (Chen et al, 2018;Lu et al, 2021). However, as with the capital-market studiesthe documented effects of the regulations are confined to a subset of firms, particularly for firms that previously did not engage in CSR activities (Dharmapala and Khanna, 2018;Fiechter et al, 2022;Jackson et al, 2020).…”

Section: Real Effects Of Csr Reporting Regulationsmentioning

confidence: 98%

“…Thomson Reuters). These studies find a significant increase in CSR activities after the regulations in several institutional settings including the EU (Fiechter et al, 2022), across countries (Jackson et al, 2020;Li and Jia, 2022), India (Boodoo, 2016) and in the Netherlands (Gao et al, 2016). Krueger et al (2021) use international data set and document a decrease in negative ESG incidents following CSR reporting regulations.…”

Section: Real Effects Of Csr Reporting Regulationsmentioning

confidence: 99%

“…Third, there is a growing empirical evidence supporting real effects of CSR reporting regulations, in particular evidence suggesting that affected firms adopt more CSR-oriented business models after the regulations. For example, studies find that the reporting regulations are associated with (1) increased CSR spending (Dharmapala and Khanna, 2018;Fiechter et al, 2022;Lu et al, 2021), (2) decreased emissions and pollution levels (Chen et al, 2018;Downar et al, 2021), (3) improved internal control processes (Barth et al, 2017; Consequences of CSR reporting regulations Liu and Tian, 2021;She, 2021) and (4) decreased employee injuries and fatalities (Christensen et al, 2017;Chen et al, 2018). However, the real effects of the CSR regulations are not homogenous across firms or industries and, again, depend on various industry and firmspecific factors including firms' pre-regulation CSR reporting and performance records (Grewal et al, 2019;Fiechter et al, 2022).…”

Section: Summary Of Main Findingsmentioning

confidence: 99%

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Consequences of CSR reporting regulations worldwide: a review and research agenda

Haji

Coram

Troshani

2022

AAAJ

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PurposeThis study reviews research that examines economic and behavioural consequences of CSR reporting regulations. Specifically, the authors evaluate the impact of CSR reporting regulations on (1) reporting quality, (2) capital-markets and (3) firm behaviour.Design/methodology/approachThe authors first describe the stated objectives and enforcement level of CSR reporting regulations around the world. Second, the authors review over 130 archival studies in accounting, finance, economics, law and management that examine consequences of the regulations.FindingsThe stated objectives and enforcement of CSR reporting regulations vary considerably across countries. Empirical research finds no significant changes in reporting quality and generally concludes that CSR reporting continues to be ceremonial rather than substantive after the regulations – consistent with corporate legitimation and “greenwashing” views. In contrast, growing evidence shows both positive and negative capital-market and real effects of the regulations. Overall, the findings from this review indicate that, on balance, there remains a significant number of questions on the net effects of CSR reporting regulations.Originality/valueThe authors offer a comprehensive review of the literature examining consequences of CSR reporting regulations. The authors identify apparent tensions in studies assessing different outcomes after the regulations: between symbolic reporting and positive capital-market outcomes; between profitability and CSR; and between CSR and the welfare of non-shareholder groups. Additionally, we highlight differences in the scope and stated objectives of CSR regulations across countries, with the regulations often reflecting socio-economic development and national interests of implementing countries. Collectively, our review indicates that institutional details are crucial when considering the design or consequences of CSR reporting regulations and/or standards.

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Real Effects of a Widespread CSR Reporting Mandate: Evidence from the European Union’s CSR Directive

Cited by 9 publications

References 37 publications

Do ESG strategies enhance bank stability during financial turmoil? Evidence from Europe

Do ESG strategies enhance bank stability during financial turmoil? Evidence from Europe

Mandatory CSR and sustainability reporting: economic analysis and literature review

Consequences of CSR reporting regulations worldwide: a review and research agenda

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