Working Paper | HBS Working Paper Series | 2017

The Consequences of Mandatory Corporate Sustainability Reporting

by Ioannis Ioannou and George Serafeim


A key aspect of the governance process inside organizations and markets is the measurement and disclosure of important metrics and information. In this chapter, we examine the effect of sustainability disclosure regulations on firms’ disclosure practices and valuations. Specifically, we explore the implications of regulations mandating the disclosure of environmental, social, and governance (ESG) information in China, Denmark, Malaysia, and South Africa using differences-in-differences 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 likelihood by treated firms of voluntarily receiving assurance to enhance disclosure credibility and increased likelihood of voluntarily adopting 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. Instrumental variables analysis suggests that increases in sustainability disclosure driven by the regulation are associated with increases in firm valuations, as reflected in Tobin’s Q. Collectively, the evidence suggest that current efforts to increase transparency around organizations’ impact on society are effective at improving disclosure quantity and quality as well as corporate value.

Keywords: disclosure regulation; sustainability reporting; mandatory disclosure; corporate sustainability; corporate social responsibility; Integrated Corporate Reporting; Training; Corporate Governance; Governing Rules, Regulations, and Reforms; Governing and Advisory Boards; Law Enforcement; Management Practices and Processes; Corporate Social Responsibility and Impact; Environmental Sustainability; Corporate Disclosure;


Ioannou, Ioannis, and George Serafeim. "The Consequences of Mandatory Corporate Sustainability Reporting." Harvard Business School Working Paper, No. 11-100, March 2011. (Revised May 2017.)