The effects 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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The climate change problem causes an increased interest of stakeholders in sustainability reporting. Consequently, improving sustainability reports by enhancing the credibility, accuracy, and transparency to lower the information asymmetry is deemed necessary for decision-making regarding investments. Therefore, firms need to adopt external sustainability assurance. However, assurance varies in terms of the assurance provider and the scope and level of assurance. This study examines the effects of different types of sustainability assurance on the reduction of information asymmetry, using a panel data set of 10238 firm-year observations from 27 European and 2 North American countries during 2009-2021. This study hypothesized a negative relationship between assurance and the different types of assurance and information asymmetry. These relationships are expected to be stronger if the corporate sustainability performance of firms increases. Contrary to the expectations, the results show that firms with assurance and with a provider from the auditing profession have higher information asymmetry in their sustainability reports than firms without assurance and with a provider from the non-auditing profession. No relation is found on the level and scope of assurance, nor on the interaction effect of corporate sustainability performance. The findings and implications are discussed in further detail.
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Faculteit der Managementwetenschappen