The effect of mandatory ESG disclosure on firms’ going-private decisions

• Main Author: HUANG, Ying-Chi
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2024
• Subjects: ESG reporting; Mandatory disclosure; Proprietary costs; Goingprivate; Accounting
• Online Access: https://ink.library.smu.edu.sg/etd_coll/548; https://ink.library.smu.edu.sg/context/etd_coll/article/1546/viewcontent/GPAC_AY2019_PhD_Ying_chi_Huang.pdf
• Institution: Singapore Management University

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.