Mandatory ESG Reporting and Cross-Listing Activities: Worldwide Evidence

Using a large international dataset, this study documents that the country-level adoption of mandatory ESG reporting requirement facilitates domestic firms’ cross-listing activities. Cross-sectional analyses reveal that this effect is more pronounced for opaque firms, those with a higher dependence on external financing, those with higher ex-ante agency costs, and for firms headquartered in home countries with a weak legal environment. Results of additional analyses reveal that firms are more likely to cross-list to countries that also have an active ESG mandate in place, countries where domestic firms have a higher ESG performance, and in developed capital markets. We further find that cross-listing firms are likely to attract a greater number of institutional investors and reduce their cost of debt after post-ESG mandate cross-listing. Finally, we document a heightened response for firms with pre-mandate voluntary ESG disclosures and a weaker response when the mandate is non-government issued.