The effect of mandatory ESG disclosure on firms' going-private decisions
Start Page
1
End Page
76
Date Issued
2024-01
Author(s)
Abstract
This study examines whether mandatory ESG disclosure encourages publicly traded firms to go private due to an increase in proprietary costs. I find that firms affected by the European Union’s Non-Financial Reporting Directive 2014/95/EU are more likely to go private after the passage of the directive. The results of the cross-sectional tests suggest that the driver of the decision to go private is the increase in proprietary costs. The main results are more pronounced for firms with fewer peers who voluntarily disclose ESG information, those operating in industries with a higher rate of new entrants, those with higher R&D expenditures, and those exhibiting lower dependence on external financing. In summary, my findings suggest that mandatory ESG disclosure can encourage firms to go private due to concerns about proprietary costs.
Subjects
ESG reporting
Mandatory disclosure
Proprietary costs
Goingprivate
Publisher
Singapore Management University
Type
thesis