Comparative analysis of environmental, social, and governance disclosures

We examine the level of environmental, social, and governance (ESG) sustainability disclosure by firms between two regimes where disclosure is mandatory versus voluntary. We use the regula-tory environment between the United States (US) and European Union (EU) to compare ESG disclosures. Firms in the US are currently under a voluntary disclosure regime. In contrast, EU members are under a mandatory disclosure regulatory regime that began in 2017. We find that EU firms outperform US firms under voluntary disclosure requirements (2007-2016), and the ESG disclosure of EU firms further improves relative to US firms after the implementation of the mandatory disclosure in Europe in 2017. Our results suggest that the 2017 adoption of disclosure guidelines in the EU is associated with improvements in EU firms' ESG disclosure. Our results regarding the value-relevance of ESG disclosure support a move toward mandatory ESG disclo-sures. Results support current initiatives that have been taken by global regulators and stock exchanges in recommending and requiring globally listed companies to disclose their ESG sus-tainability information to portray accurate and comprehensive corporate reporting. The results further our understanding of how firms from different institutional environment settings may have disclosed their ESG practices, thus providing opportunities for future research.