Impact of EU corporate sustainability reporting directive on financial performance: evidence from companies

Li J. Zhao T. Taghizadeh-Hesary F.
2025 Emerald Publishing

Journal of Risk Finance
2025

Purpose: To address the challenge that the information disclosure regarding environmental risk assessment is often insufficient, the European Union (EU) officially pass the Corporate Sustainability Reporting Directive (CSRD) in November 2022, which come into effect in January 2023. We wrote this article to explore the impact of the EU CSRD on financial performance of enterprises. Design/methodology/approach: This study employs the difference-in-differences method for empirical analysis based on the panel data of 451 listed companies in the European Union from 2018 to 2023. Findings: The implementation CSRD significantly improves the financial performance of enterprises in the EU, and this conclusion is still valid after several robustness tests including OLS regression and PSM-DID method. The impact of CSRD on financial performance is heterogeneous. Specifically, CSRD shows more significant promotion effect for firms with older boards, smaller scale, and firms with higher proportion of female directors and employees. CSRD promotes enterprise performance through two channels: optimizing management efficiency and enhancing operating efficiency. CSRD significantly achieves substantial results in promoting the environmental, social, and governance (ESG) performance growth of enterprises. Originality/value: These findings provide an important policy basis for improving the corporate sustainability reporting system and promoting corporate green transformation.

Corporate sustainability reporting directive , DID method , ESG performance , Financial performance , Heterogeneous impact

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School of Economics and Management, China University of Geosciences Beijing, Beijing, China
School of International Trade and Economics, University of International Business and Economics, Beijing, China
Tokai Research Institute for Environment and Sustainability (TRIES), Tokai University, Tokyo, Japan
Narxoz University, Almaty, Kazakhstan

School of Economics and Management
School of International Trade and Economics
Tokai Research Institute for Environment and Sustainability (TRIES)
Narxoz University

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