This study aims to examine whether mandatory sustainability/corporate social responsibility (CSR) disclosure generates spillover effects beyond firms directly subject to regulation. While prior research focuses mainly on direct compliance effects, little is known about whether disclosure mandates reshape reporting practices among nonregulated firms, despite the relevance of this question for current debates on the scope of European Union (EU) sustainability regulation.
Using Sweden’s implementation of the Non-Financial Reporting Directive (NFRD) as a natural experiment, the study exploits statutory size thresholds that distinguish directly regulated firms from nonregulated listed small and medium-sized enterprises (SMEs) within a common institutional environment. A generalized difference-in-differences design estimates reform effects for directly regulated Swedish firms and nonregulated Swedish SMEs relative to non-EU manufacturing firms, while using variation in SMEs’ distance from the thresholds to identify spillover effects. CSR reporting is measured using hand-collected annual and CSR reports and issue-level coding of substantive disclosures based on a SASB materiality framework.
Nonregulated SMEs close to the thresholds increase CSR reporting substantially following the reform, with stronger effects among firms with low pre-reform reporting levels. The findings indicate that mandatory disclosure can generate meaningful spillover effects beyond formally regulated firms and that firms near regulatory thresholds may respond strongly even when legally outside the mandate.
The study shows that mandatory CSR disclosure can reshape reporting practices among firms legally outside the mandate. It theorizes regulatory thresholds as institutional boundary markers that heighten visibility, stakeholder expectations and uncertainty about future inclusion, linking targeted transparency with spillover coercive and mimetic pressures beyond formal compliance boundaries.
