Reflection of the Europeanisation of sustainable disclosure rules: The proactive adjustments of ESG reporting practices and financial returns by US companies in anticipation of the EU CSRD.

Abstract

This thesis examines the proactive adjustments in ESG reporting practices and financial performance by American companies in anticipation of the European Corporate Sustainability Reporting Directive (CSRD). Focusing on the period from January 2016 to December 2023, the sample comprises a matched dataset of 1,238 publicly traded US companies. The study explores the impact of the announcement of the CSRD on US firms with significant EU activities, focusing on their Environmental, Social and Governance (ESG) scores. Grounded in a differences-in-differences analysis, the research investigates whether the announcement of the European regulation leads to anticipatory changes in ESG practices and financial strategies among US firms. The findings reveal a significant increase post-announcement in sustainability performance among targeted companies, while the effect on enterprise value is less clear due to external factors. The announcement notably influences environmental and social dimensions. US non-targeted firms experienced significant mixed variations in their ESG scores, with a decline in the environmental pillar and an increase in the social dimension post-announcement, suggesting a broader influence of the EU regulation on their sustainability performance. While the governance pillar does not exhibit any significant change, the environmental performance decline however diminishes support for potential spillover effects on non-targeted firms. The thesis provides insights into the broader implications of the CSRD on global corporate practices and highlights the need for further research to explore these dynamics more comprehensively.