Misum Working Paper Series,
Stockholm School of Economics, Mistra Center for Sustainable Markets (Misum)

Abstract: We examine the effects of mandatory ESG reporting on firms’ corporate performance. Using variation from Sweden’s size-based ESG reporting reg- ulation, which requires medium private firms to start reporting ESG infor- mation from 2017 onward, we document that mandatory ESG reporting im- proves firms’ corporate performance. This finding is consistent with two non- mutually exclusive mechanisms: (1) disclosing ESG information enlarges the opportunity set of mandated firms to enter larger supply chains, and (2) cap- ital providers incorporate ESG information in their debt pricing decisions. In addition, we document the ESG disclosure dynamics of private firms in both a voluntary and a mandatory regime. Our results withstand several robustness tests and an alternative research design. Collectively, our findings provide insights into the consequences of mandatory ESG reporting at the firm level.

Keywords: private firms; mandatory ESG reporting; regression discontinuity design; difference-in-differences design

JEL-codes: G38; K22; M14; M41; M48

Language: English

52 pages, First version: January 10, 2022. Revised: January 30, 2023. Earlier revisions: January 30, 2023, January 30, 2023, January 30, 2023.

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