Environmental, Social and Governance Sustainability Disclosures: Evidence from EU and US

We examine whether higher levels of environmental, social, and governance (ESG)sustainability disclosures are attained under voluntary or mandatory disclosure regimes.We use the regulatory differences between the United States (US) and European Union(EU) settings, as firms in the US are currently disclosing ESG information on a voluntarybasis, whereas their counterparts in the EU are required to disclose such informationstarting fiscal year 2017. Drawing on a sample of 2563 firm-year observations from theUS and EU in a period from 2007-2019, we report three main findings: (1) for the fullsample period, EU firms have an overall higher ESG disclosure relative to US firms; (2)EU firms outperform US firms under voluntary disclosure requirements (2007-2016); (3)after 2017, the ESG disclosure of EU firms further improves relative to US firms. Takentogether, our results suggest that the 2017 adoption of disclosure guidelines in the EU isassociated with improvements in EU firms’ ESG disclosure. We contribute to theliterature by examining ESG disclosure under voluntary and mandatory regimes andwhether the EU disclosure guidance has influenced disclosure of non-financial ESGsustainability information. Our results are robust after performing additional analyses inaddressing potential endogeneity concerns. Overall, our findings have policy, practical,and research implications, as they underscore the importance of more rigorous ESG sustainability disclosures