On the Costs, Benefits and Externalities of Mandatory CSR Disclosure Laws

Research output: ThesisDoctoral ThesisCollection of Articles


Regulation is a tool policymakers use to tackle national and global challenges. Currently, several regulators including the EU are in the process of adopting and issuing new corporate social responsibility (CSR) disclosure laws. The overarching aim of these laws is to encourage companies to develop a responsible approach to business. Consequently, they are likely to induce fiscal and real effects, some of which may be unintended. This calls for research on the economic consequences of mandatory CSR disclosure. Hence, this dissertation conducts a post-implementation review of CSR disclosure laws using difference-in-differences estimation. Specifically, applying the regulatory cost-benefit analysis (CBA) as a framework this dissertation examines the related adoption costs, benefits, and externalities with three distinct essays.
The first essay analyzes the nature and the cross-country variation of the magnitude and stickiness of the adoption costs of mandatory CSR disclosure laws. The results show that the adoption increases administrative, but not production-related costs. The average annual increase in SG&A is 2% after the adoption. The costs as well as cost stickiness vary by country. Adoption costs are more pronounced in shareholder-oriented countries characterized by common law legal origin, high shareholder litigation risk and lenient employment protection.
The second essay examines whether mandatory CSR disclosure laws affect audit fees. Given that the environmental, social and governance elements of mandatory CSR disclosures have significant commonalities with the auditors’ risk assessment procedures targeted at obtaining an understanding of the entity and its environment (ISA 315), the results suggest a significant decrease in audit fees after the adoption. The fee-decrease is more pronounced in audit markets prone to price-competition and in companies where regulatory environment is stronger in the parent company headquarter country than in the subsidiary countries. Audit risk and complexity dampen the fee-decrease.
The third essay examines whether mandatory CSR disclosure laws have externalities on companies not subject to these laws. The findings indicate that companies in the adopting countries increase capital expenditure and employment relative to companies in non-adopting countries. The presence of regulated firms in the industry moderates these investment and employment activities which are weakly related to growth opportunities. Overall, the findings imply that the spillover effects in non-disclosing firms represent a strategic response to competitive threats.
The main contribution of the thesis lies in documenting evidence of the unintended economic consequences of mandatory CSR disclosure. Those consequences can be categorized as adoption costs, benefits, and externalities. First, the results imply that the adoption begins primarily as an administrative rather than productional reform, and the adoption is more expensive in shareholder-oriented countries. Second, while increasing costs, the mandates can bring benefits to the adopting companies in terms of lower audit fees. Third, the results illustrate the importance of spillover effects to preparers of reporting mandates: competitive forces may extend the scope of regulation to unregulated firms.
Original languageEnglish
QualificationDoctor of Philosophy
  • Ittonen, Kim, Degree supervisor
  • Colak, Gonul, Thesis supervisor
  • Martikainen, Minna, Thesis supervisor, External person
Award date02.12.2022
Place of PublicationHelsinki
Print ISBNs978-952-232-476-4
Electronic ISBNs978-952-232-477-1
Publication statusPublished - 2022
MoE publication typeG5 Doctoral dissertation (article)


  • 512 Business and Management
  • mandatory CSR disclosure
  • cost-benefit analysis
  • externalities

Areas of Strength and Areas of High Potential (AoS and AoHP)

  • AoS: Financial management, accounting, and governance


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