Investors’ Preferences for Qualitative Characteristics of Sustainability Disclosures: A Discrete Choice Experiment and an Analysis of Willingness to Pay

To ensure that sustainability disclosures provide decision-useful information, the European Sustainability Reporting Standards (ESRS) define five qualitative characteristics (QCs) that such disclosures should possess: Relevance, Faithful Representation, Comparability, Verifiability, and Understandability. Using a discrete choice experiment, we examine investors’ preferences for these QCs by analyzing effects on perceived decision usefulness and willingness to pay (WTP). Each QC is manipulated across three levels, underachieved, sufficient, and overachieved, reflecting ESRS requirements. Improvements from underachieved to sufficient levels significantly increase perceived decision usefulness and WTP across all QCs. Improvements beyond the sufficient level, however, are valued only for Comparability and Faithful Representation, whereas the remaining QCs exhibit an asymmetric utility function that flattens beyond this level. We further find limited evidence that firm financial performance moderates investors’ valuation of disclosure quality. Overall, not all QCs are equally valued, providing implications for standard setters seeking to prioritize key determinants of decision usefulness.