The effectiveness of different types of sustainability assurance on the reduction of information asymmetry
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2023-07-11
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en
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To address concerns raised by capital providers and other stakeholders about the trustworthiness of performance data presented in sustainability reports, the Corporate Sustainability Reporting Directive mandates companies to report according to specific standards and have an audit of the information that they report. However, companies still retain the autonomy to determine the assurance provider as well as the level and scope of assurance. This study explores the relationship between the types of assurance and the reduction of information asymmetry. Drawing upon a panel data set consisting of 10.238 firm-year observations from 27 European and 2 North American countries during the period 2009-2021, the findings from the analyses suggest that companies with assurance on their sustainability report have more information asymmetry than companies without assurance. The results indicate that external assurance is mainly adopted by companies with inferior sustainability performance as a risk management strategy to gain a positive reputation regarding sustainable development. Among the companies in countries with a shareholder orientation, the types of assurance play a significant role in explaining variation in information asymmetry. Suggesting that country-specific characteristics have an impact on the various choices related to sustainability assurance. This study discusses the findings and their implications.
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Faculteit der Managementwetenschappen