Abstract

In this study, we investigate the impact of ESG material information distinctiveness on firm value, and furthermore examine how other sources of legitimacy can influence this relationship. With this research effort, we contribute to the revitalized interest in the study of optimal distinctiveness in the wider strategy literature. Using ESG materiality scores from the Bloomberg database and listed EU firms’ data from 2016 to 2020, our findings suggest that, as ESG disclosure becomes an institutionalised practice among European firms due to Directive 2014/95/EU, the extent of material ESG disclosure positively influences firm value. These effects were more pronounced at the highest and lowest levels of distinctiveness. Furthermore, the findings indicate that analyst earnings forecasts play a crucial role in granting an additional source of legitimacy for firms. These forecasts provide a buffer-effect that allow firms to exhibit a certain degree of non-conformity in terms of ESG disclosure(?) without compromising their overall legitimacy.