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The Effect of Country‐Level Investor Protection on the Voluntary Assurance of Sustainability Reports
Author(s) -
Herda David N.,
Taylor Martin E.,
Winterbotham Glyn
Publication year - 2014
Publication title -
journal of international financial management and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.818
H-Index - 37
eISSN - 1467-646X
pISSN - 0954-1314
DOI - 10.1111/jifm.12018
Subject(s) - sustainability , credibility , business , corporate governance , quality assurance , accounting , investor protection , sustainability reporting , turnover , corporate social responsibility , voluntary disclosure , finance , economics , public relations , marketing , ecology , management , political science , law , biology , service (business)
Over the last several years, sustainable (or socially responsible) investing has experienced rapid growth around the world reflecting an increasing awareness by investors of social, environmental, ethical, and corporate governance issues. This heightened awareness among investors has resulted in a demand for sustainability reporting and a corresponding increase in demand for assurance of sustainability information to enhance its credibility. Using an investor‐based view, we examine the impact of country‐level investor protection on reporting companies’ voluntary sustainability assurance decisions. We find that both the decision to obtain voluntary sustainability report assurance and the decision to obtain higher quality assurance are more likely for firms domiciled in countries that have weaker investor protection. Our results indicate that managers in low investor protection countries use voluntary sustainability assurance as a substitute monitoring mechanism.