Corporate sustainability in the Nordic countries - The curvilinear effects on shareholder returns

The purpose of this paper is to investigate the effects of Corporate Sustainability (CS; actual practices and reporting) on total shareholder returns (TSR). We also investigate the subcomponents of Corporate Sustain ability, i.e., environmental, social, and governance practices. We use fixed effects regression models to investigate the relationship between Corporate Sustainability and TSR using 944 firm-year observations in Nordic stock markets. We proxy sustainability reporting through Bloomberg's Environmental Social Governance (ESG) scores. Our robustness checks include tests for causality and non-linearity of the relationship. We find a positive relation between CS and TSR. Especially disclosure on governance practices adds shareholder value. Firms that over report, however, experience declines in TSR. The robustness checks confirm our findings. This study highlights the value relevance of disclosing practices that relate to Corporate Sustainability. We extend previous studies that solely focus on disclosure.