Does mandating corporate social and environmental disclosure improve social and environmental performance?: Broad-based evidence regarding the effectiveness of directive 2014/95/EU

Given that the aim of corporate social and environmental disclosure mandates is to improve corporate social and environmental performance, this study investigates the impact of such mandates on performance. Using a difference-in-differences analysis, we examine trends in corporate social and environmental performance before and after the introduction of Directive 2014/95/EU (hereafter, the Directive), comparing affected European companies with companies in the United States (US), based on a balanced sample of 358 European companies (excluding United Kingdom (UK) companies, because they were subject to additional regulations that came into effect around the same time) and 470 US companies from 2009 to 2020. We find that European companies' performance has not improved substantially since the Directive came into effect in 2017, nor have they improved compared to US companies. Thus, the evidence suggests that the Directive has not improved European companies’ social and environmental performance. Our study provides broad-based evidence of the (in)effectiveness of mandating corporate social and environmental disclosures to enhance performance. Our findings will be of interest to regulators considering disclosure mandates, as well as stakeholders and investors interested in enhancing social and environmental performance.