Regulatory Spillovers, Supply-Chain Networks, and the Valuation Relevance of ESG Risk

Regulatory Spillovers, Supply-Chain Networks, and the Valuation Relevance of ESG Risk | Research Square window.SnipcartSettings = { analytics: { enabled: false } }; (function() { var accessVector = localStorage.getItem('access_vector') || ''; window.dataLayer = window.dataLayer || []; if (accessVector) { window.dataLayer.push({ user: { profile: { profileInfo: { snid: accessVector } } } }); } })(); (function(w,d,s,l,i){w[l]=w[l]||[];w[l].push({'gtm.start':new Date().getTime(),event:'gtm.js'});var f=d.getElementsByTagName(s)[0],j=d.createElement(s),dl=l!='dataLayer'?'&l='+l:'';j.async=true;j.src='https://www.googletagmanager.com/gtm.js?id='+i+dl;f.parentNode.insertBefore(j,f);})(window,document,'script','dataLayer','GTM-K279D39R'); Browse Preprints In Review Journals COVID-19 Preprints AJE Video Bytes Research Tools Research Promotion AJE Professional Editing AJE Rubriq About Preprint Platform In Review Editorial Policies Our Team Advisory Board Help Center Sign In Submit a Preprint Cite Share Download PDF Research Article Regulatory Spillovers, Supply-Chain Networks, and the Valuation Relevance of ESG Risk Michael A. Aruwaji This is a preprint; it has not been peer reviewed by a journal. https://doi.org/ 10.21203/rs.3.rs-8829686/v1 This work is licensed under a CC BY 4.0 License Status: Posted Version 1 posted You are reading this latest preprint version Abstract Recent sustainability regulations extend firms’ sustainability risk responsibilities beyond their internal operations, embedding risk within supply-chain relationships. To investigate this, the study employs a panel of publicly listed firms from emerging markets over the period 2015 to 2024. The analysis employs network-informed econometric specifications and exploits regulatory tightening as a quasi-exogenous source of variation transmitted through pre-existing supply-chain links to examine how supply-chain positioning influences the valuation-relevance of sustainability risk. The results show that firms occupying central or brokerage positions within production networks exhibit higher ESG exposure materiality and heightened valuation sensitivity following regulatory intervention, suggesting that investors incorporate indirect, network-based sustainability risks into firm value. These findings contribute to accounting research by showing that sustainability regulation extends the effective informational boundary of the firm, with implications for sustainability reporting, risk assessment, and value-chain accountability. Complementary machine-learning analyses are applied exclusively for out-of-sample predictive validation and do not inform causal inference. JEL Classification: M41; G14; G32; Q56. Accounting regulatory spillovers supply-chain networks sustainability risk firm valuation Full Text Additional Declarations The authors declare no competing interests. Cite Share Download PDF Status: Posted Version 1 posted You are reading this latest preprint version Research Square lets you share your work early, gain feedback from the community, and start making changes to your manuscript prior to peer review in a journal. As a division of Research Square Company, we’re committed to making research communication faster, fairer, and more useful. We do this by developing innovative software and high quality services for the global research community. Our growing team is made up of researchers and industry professionals working together to solve the most critical problems facing scientific publishing. Also discoverable on Platform About Our Team In Review Editorial Policies Advisory Board Help Center Resources Author Services Accessibility API Access RSS feed Manage Cookie Preferences © Research Square 2026 | ISSN 2693-5015 (online) Privacy Policy Terms of Service Do Not Sell My Personal Information {"props":{"pageProps":{"initialData":{"identity":"rs-8829686","acceptedTermsAndConditions":true,"allowDirectSubmit":true,"archivedVersions":[],"articleType":"Research Article","associatedPublications":[],"authors":[{"id":588227568,"identity":"55063049-2508-4b57-91b7-c1e8c52733d1","order_by":0,"name":"Michael A. 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