CSR Sustainability Reporting and Enterprise Value: The Moderating Role of Regulatory Quality in the European Policy Landscape

ABSTRACT

The study looks into the relationship between the extent of CSR Sustainability Reporting and Enterprise Value (EV) among European listed companies. The introduction of the Corporate Sustainability Reporting Directive (CSRD) 2022/2464/EU and the European Sustainability Reporting Standards (ESRS) has significantly heightened the demand for broader and more substantive sustainability disclosure. Against this backdrop, the research explores the moderating role of country‐level regulatory quality. Legitimacy Theory (LT) and Institutional Theory (IT) provide the theoretical foundations. The empirical analysis draws on a longitudinal sample of European listed companies included in the S&P Europe 350 Index over the period 2019–2023. Broader CSR Sustainability Reporting exerts a positive and statistically significant effect on EV. Furthermore, this relationship is stronger in national contexts with higher regulatory quality, thereby confirming the moderating role of the institutional environment. Extant research has predominantly explored the direct link between the extent of CSR Sustainability Reporting and EV, without accounting for the institutional context. Therefore, the study addresses this gap by introducing country‐level regulatory quality as a moderating variable. Moreover, the 2019–2023 period provides a pre‐CSRD baseline for future post‐adoption benchmarking. Theoretically, the study enriches both LT and IT by showing that the value relevance of sustainability disclosure is contingent upon the strength of the underlying institutional infrastructure. Findings inform managers, investors, and policymakers about the role of regulatory quality in shaping the market relevance of CSR Sustainability Reporting. The research contributes to ongoing debates on the EU sustainability agenda by exhibiting that stronger institutional frameworks enhance the credibility and societal relevance of sustainability disclosure, reducing greenwashing risk and supporting the transition towards more accountable corporate conduct.