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The signaling role of voluntary ESG assurance
University of Gothenburg, Sweden.ORCID iD: 0000-0001-7340-3124
2021 (English)Conference paper, Published paper (Refereed)
Abstract [en]

Using a sample of European firms, this study examines the signaling role of voluntary assurance of non-financial disclosures on their related performance, measured using environment, social, and governance (ESG) scores. Voluntary disclosures reduce information asymmetry and information risk, but such reductions are conditional on the verifiability of the disclosed information, thus requiring credibility. Given that skepticism in the reports is inevitable, credibility is paramount for differentiating firm performance. Credibility is enhanced by voluntarily purchasing assurance from an independent third party. This study argues that only firms with superior non-financial performance have an incentive to purchase assurance to differentiate themselves from poor-performing counterparts. The results reveal that firms with voluntary third-party assured reports have significantly higher ESG scores than those with unassured reports. This study offers new evidence on the signaling value of voluntary assurance on subsequent ESG scores.

Place, publisher, year, edition, pages
2021.
Keywords [en]
ESG, Non-financial disclosure, Signaling theory, Voluntarily, Assurance
National Category
Business Administration
Identifiers
URN: urn:nbn:se:mdh:diva-61339OAI: oai:DiVA.org:mdh-61339DiVA, id: diva2:1720409
Conference
FMA International 2021 Virtual European Conference, Online, 15-18 June, 2021
Available from: 2022-12-19 Created: 2022-12-19 Last updated: 2022-12-19Bibliographically approved

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Abay, Zelalem

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