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The Impact of EU Taxonomy Mandatory Disclosure on Corporate Valuation: Evidence from a Difference-in-Differences Analysis

Han, Lixue LU and Sheng, Yuchenxu LU (2025) NEKN01 20251
Department of Economics
Abstract
The EU Taxonomy is one of the most mature and comprehensive classification systems for sustainable activities. It aims to increase information transparency, reduce corporate greenwashing, and direct capital flows toward environmentally sustainable economic activities. Starting in 2022, companies have been required to disclose the share of their economic activities that align with the Taxonomy. This study takes 2022 as the policy shock point and applies a Difference-in-Differences (DID) model to examine the causal effect of the mandatory disclosure rules on corporate valuations. We find that mandatory disclosure under the EU Taxonomy reduces information gaps between investors and companies by standardizing information. This helps curb... (More)
The EU Taxonomy is one of the most mature and comprehensive classification systems for sustainable activities. It aims to increase information transparency, reduce corporate greenwashing, and direct capital flows toward environmentally sustainable economic activities. Starting in 2022, companies have been required to disclose the share of their economic activities that align with the Taxonomy. This study takes 2022 as the policy shock point and applies a Difference-in-Differences (DID) model to examine the causal effect of the mandatory disclosure rules on corporate valuations. We find that mandatory disclosure under the EU Taxonomy reduces information gaps between investors and companies by standardizing information. This helps curb greenwashing, attract investors with green preferences, and increase company valuations. We also examine heterogeneous effects. In high-carbon industries, which face greater information uncertainty, the positive valuation effect of disclosure is stronger. Companies with low ESG scores can use disclosure after policy implementation to send positive signals and achieve higher valuation gains. In contrast, companies with high ESG scores show limited marginal effects. Finally, from a mechanism perspective, we suggest that mandatory disclosure may enhance corporate value through three channels: improving operational efficiency, increasing investment intensity, and strengthening sustainable performance. (Less)
Please use this url to cite or link to this publication:
author
Han, Lixue LU and Sheng, Yuchenxu LU
supervisor
organization
course
NEKN01 20251
year
type
H2 - Master's Degree (Two Years)
subject
keywords
EU Taxonomy, corporate valuation, DID
language
English
id
9211044
date added to LUP
2025-09-12 09:59:10
date last changed
2025-09-12 09:59:10
@misc{9211044,
  abstract     = {{The EU Taxonomy is one of the most mature and comprehensive classification systems for sustainable activities. It aims to increase information transparency, reduce corporate greenwashing, and direct capital flows toward environmentally sustainable economic activities. Starting in 2022, companies have been required to disclose the share of their economic activities that align with the Taxonomy. This study takes 2022 as the policy shock point and applies a Difference-in-Differences (DID) model to examine the causal effect of the mandatory disclosure rules on corporate valuations. We find that mandatory disclosure under the EU Taxonomy reduces information gaps between investors and companies by standardizing information. This helps curb greenwashing, attract investors with green preferences, and increase company valuations. We also examine heterogeneous effects. In high-carbon industries, which face greater information uncertainty, the positive valuation effect of disclosure is stronger. Companies with low ESG scores can use disclosure after policy implementation to send positive signals and achieve higher valuation gains. In contrast, companies with high ESG scores show limited marginal effects. Finally, from a mechanism perspective, we suggest that mandatory disclosure may enhance corporate value through three channels: improving operational efficiency, increasing investment intensity, and strengthening sustainable performance.}},
  author       = {{Han, Lixue and Sheng, Yuchenxu}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{The Impact of EU Taxonomy Mandatory Disclosure on Corporate Valuation: Evidence from a Difference-in-Differences Analysis}},
  year         = {{2025}},
}