Mandatory Nonfinancial Disclosure and Risk Management: A Study of Mandated Nonfinancial Disclosure in the European Union

Carl Johan Christian Svensson & Anton Carl Tomas Wängberg

Student thesis: Master thesis


In this study, we examine how mandated nonfinancial disclosure affects risk management in the European Union. Specifically, we examine the implementation of European law 2014/95/EU, mandating companies within the European Union to disclose nonfinancial information related to environmental, social and governance (ESG) matters. By using a difference-in-difference estimation with matched samples, we predict and find (1) that treatment firms subject to the legislation experience a larger increase in risk (measured in Value at Risk and Expected Shortfall) after the implementation of the mandate compared to control firms not affected by the mandate. In a second step, we use a multiple regression model with an interaction term for different treatment groups depending on their preregulatory ESG-performance. We predict and find (2) that treatment firms with a relatively high preregulatory ESG-performance are less affected in terms of risk by the mandate. These findings suggest that market participants does not perceive that the benefits of the mandated disclosure outweighs the imposed proprietary effects of increased transparency. Additionally, the findings suggest that firms with a strong nonfinancial disclosure performance prior to the legislation are able mitigate the informational shock and imposed proprietary effects subsequent to the mandate.

EducationsMSc in Accounting, Strategy and Control, (Graduate Programme) Final Thesis
Publication date2019
Number of pages164
SupervisorsYanlei Zhang