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The effects of the EU Non-Financial Reporting Directive on corporate social responsibility

Cuomo, Francesca and Gaia, Silvia and Girardone, Claudia and Piserà, Stefano (2022) 'The effects of the EU Non-Financial Reporting Directive on corporate social responsibility.' The European Journal of Finance. pp. 1-27. ISSN 1351-847X

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Abstract

Using a large sample of EU non-financial firms over the period 2008–2018, this study examines the effect of the 2014 EU Non-Financial Reporting Directive on corporate social responsibility (CSR) and finds that the Directive has led to an increase in CSR transparency and performance. Further, it shows that the association between the Directive and CSR transparency is stronger for smaller firms, firms highly followed by analysts and firms headquartered in countries with strong legal systems. The adoption of CSR reporting after the Directive’s enactment, small firm size and investments in research and development strengthen the positive effects of the Directive on CSR performance. However, the mandating of CSR reporting assurance by some EU member states seems not to have any significant impact. Lastly, our study shows that after the Directive’s enactment, firms adopting CSR reporting experienced lower systematic risk and cost of equity. Our study contributes to the debate about whether and how non-financial disclosure should be regulated and shows the positive effects of the ‘comply or explain’ approach. It also provides insights for the EU in relation to the recently approved proposal to extend CSR reporting regulation to listed small and medium-sized enterprises and mandate CSR reporting assurance.

Item Type: Article
Uncontrolled Keywords: EU firms; CSR disclosure; non-financial reporting directive; social and environmental performance; comply or explain principle
Divisions: Faculty of Social Sciences
Faculty of Social Sciences > Essex Business School
Faculty of Social Sciences > Essex Business School > Essex Accounting Centre
SWORD Depositor: Elements
Depositing User: Elements
Date Deposited: 28 Sep 2022 14:21
Last Modified: 13 Oct 2022 11:09
URI: http://repository.essex.ac.uk/id/eprint/33315

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