CONSEQUENCES OF SUSTAINABLE DEVELOPMENT GOALS DISCLOSURE

Abstract

The purpose of the study is to analyze the economic implications of Sustainable Development Goals (SDGs) reporting by companies, given the increasing focus on sustainability and corporate responsibility worldwide. The study is based on the stakeholder theory and the agency theory, which examine the effect of SDGs disclosure on firm value, financial performance, Environmental, Social, and Governance ESG Score (ESGs), and capital structure. All these theories present a model of how SDGs disclosure should be interpreted as a tool by which companies react to their expectations and increase their legitimacy, as well as minimize information asymmetry. The study includes the years 2019-2023 based on a panel dataset of European-listed financial and non-financial companies. The data were acquired using the Asset4-Refinitiv Eikon database and thus contained 6,787 data points during four years on 1886 firms. The analysis takes into consideration the firm-specific and board attributes such as firm size, leverage, sales growth, governance score, and the percentage of return on equity. The empirical results show that the SDGs disclosure notably and positively influences the value of firms and financial performance as well as the ESG score, meaning that the firms with more SDGs disclosure have better sustainability and governance results. On capital structure, the findings indicate that the impact of SDGs disclosure is rather small, but it can still help to increase the level of stakeholder trust and facilitate financing choices. This means that sustainability disclosure is slowly surpassing the conventional financial metrics, and it is becoming complementary to the former in creating capital structure decisions of firms. Moreover, in accordance with differing financing tactics in reaction to sustainability transparency. These findings can be added to the stakeholder and agency theories because they indicate that SDGs disclosure fosters corporate transparency and sustainability performance, and its financial effects are contingent on the market perceptions and institutional settings. Based on this, the study suggests that companies should focus more on SDGs, making it a part of their fundamental operations as opposed to the disclosure practices that are symbolic. Clearer and more standardized SDGs reporting frameworks are also suggested to policymakers and regulators in order to enhance the comparability and reliability of sustainability information. The study has various limitations despite its contributions. The time frame of the study is rather short, and this includes the COVID-19 pandemic, which could have affected corporate disclosure behavior. Besides, the analysis is based on the aggregate disclosure of SDGs with no one-on-one look at the goals. Further studies can be done to expand this study to include longer time frames, a variety of institutional contexts, or alternative SDGs disclosure and sustainability performance indicators.