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Environmental Disclosure Tone and Analyst Forecast Behaviour: A Study of the EU Nonfinancial Reporting Directive

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  • Mumtaheena Anwar
  • Elisabeth Sinnewe
  • Annette Quayle

Abstract

We investigate how the regulation of environmental disclosures affects the corporate environmental disclosure tone (EDT) and analyst forecast behaviour (AFB) following the implementation of the European Union Nonfinancial Reporting Directive. Based on hand‐collected data from environmentally sensitive European firms, we find that the Directive encourages firms to adopt a cautious EDT. Our findings suggest that analysts are sensitive to EDT in the regulated period, where firms' optimistic and uncertain disclosures may contribute to a greater forecast error and dispersion. We show that the Directive encourages an improved reporting environment by shifting firms' environmental reporting and facilitating improved firm valuation.

Suggested Citation

  • Mumtaheena Anwar & Elisabeth Sinnewe & Annette Quayle, 2025. "Environmental Disclosure Tone and Analyst Forecast Behaviour: A Study of the EU Nonfinancial Reporting Directive," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 65(4), pages 3574-3604, December.
    • Handle: RePEc:bla:acctfi:v:65:y:2025:i:4:p:3574-3604
    DOI: 10.1111/acfi.70059
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