Environmental, social and governance disclosure driven firm values – evidence from european listed companies

This research aimed to establish the impact of Environmental, Social, and Governance Disclosure (ESGD) factors in European publicly listed firms. Using data on 600 companies from 2015-2023, a total of 3,900 firm-year observations were drawn from the Bloomberg database. The study employed key performance indicators such as Return on Assets (ROA), Return on Equity (ROE), and Tobin’s Q (TBQ). The results derived from regression analysis, showed a positive relationship between ESGD practices and Return on Assets (ROA), suggesting improved operational performance. Conversely, a negative association with ROE reflected the complex interplay between ESGD initiatives and shareholder returns. Tobin’s Q outcomes varied. These insights throw light on ESGD as an important strategic means of enhancing transparency and effectiveness in the financial results. It was observed that there were disparities in the adoption, with Western Europe leading the pack as it had stronger regulation, beginning with the EU taxonomy and the Sustainable Finance Disclosure Regulation (SFDR). Furthermore, the research established the importance of diversity and inclusion within ESGD frameworks and showed how these endeavors related positively to innovation and staff encouragement.