Mandatory ESG Reporting and Corporate Performance

We examine the effects of mandatory ESG reporting on firms’ corporate performance. Using variation from Sweden’s size-based ESG reporting regulation, which requires medium private firms to start reporting ESG information from 2017 onward, we document that mandatory ESG reporting improves firms’ corporate performance. This finding is consistent with two nonmutually exclusive mechanisms: (1) disclosing ESG information enlarges the opportunity set of mandated firms to enter larger supply chains, and (2) capital 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