The Financial Impact of the Corporate Sustainability Reporting Directive (CSRD) on Shareholder Value in the European Union: An Event Study

Abstract

This research investigates the financial impact of the Corporate Sustainability Reporting Directive (CSRD) on shareholder value in the European Union using an event study methodology. The CSRD, a key component of the European Green Deal, mandates better sustainability reporting for large companies and listed SMEs. By examining market reactions to significant CSRD-related events, this study aims to determine how mandatory non-financial disclosures affect stock prices. Despite the growing emphasis on environmental, social, and governance (ESG) factors in investment decisions, there is no empirical evidence on the direct impact of this directive. This research fills this gap by analysing cumulative abnormal returns (CARs) and regression models to assess the CSRD's influence on financial performance. Findings suggest that market reactions to CSRD announcements are varied, with no significant immediate impact on shareholder value observed. I do, however, strongly advise readers to consider my findings critically in light of the short-term focus of event study methodology, and the nature of CSRD implementation, which may require longer-term analysis to fully capture its impact. Additionally, I invite scholars to expand on the ideas covered in this study and conduct additional research on the subject.