The Extent of CSRD Reporting and Investor Confidence : Empirical Evidence for the First Year of Implementation

Sammanfattning

The financial year 2024 marks the beginning of mandatory reporting under the Corporate Sustainability Reporting Directive (CSRD), initiating a multi-year transition towards more standardised sustainability reporting within the European Union. While the CSRD aims to standardise sustainability reporting requirements, companies may still differ in the extent of sustainability information they disclose. Whether and how investors respond to these differences in reporting extent remains unclear. This study aims to provide insights into this relationship by examining the extent of CSRD reporting and investor confidence among large EU companies during the first year of implementation. A quantitative research design, grounded in signaling, agency and legitimacy theory, was developed. The design is implemented on 195 large European companies which span seven EU member states. The CSRD reports were analysed by using a Term Frequency Inverse Document Frequency (TF-IDF) text analysis approach, where a keyword dictionary was developed from the European Sustainability Reporting Standards (ESRS) framework to measure the extent of disclosure. Environmental, Social, Governance, and overall disclosure scores are constructed and tested against investor confidence. Investor confidence is measured using Tobin’s Q, and the relationship is tested through OLS regression analysis. The results show no significant relationship between overall CSRD reporting extent and investor confidence. However, social disclosure scores show a positive and statistically significant relationship with Tobin’s Q, while environmental and governance disclosure scores are not significant.