Managerial capture of sustainability assurance. Empirical evidence and capital market reactions
[EN] Purpose This paper aims to investigate the potential influence of managers on sustainability assurance. When the quality of sustainability reporting is questionable because of subsequent restatements, the authors explore whether assurance is used to enhance its credibility as a legitimization t...
| Autores: | , , |
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| Tipo de recurso: | artículo |
| Estado: | Versión publicada |
| Fecha de publicación: | 2024 |
| País: | España |
| Institución: | Universidad de Salamanca (USAL) |
| Repositorio: | GREDOS. Repositorio Institucional de la Universidad de Salamanca |
| OAI Identifier: | oai:gredos.usal.es:10366/164731 |
| Acceso en línea: | http://hdl.handle.net/10366/164731 |
| Access Level: | acceso embargado |
| Palabra clave: | Sustainability disclosure Assurance Managerial influence Cost of capital Legitimacy theory Impression management 5311 Organización y Dirección de Empresas |
| Sumario: | [EN] Purpose This paper aims to investigate the potential influence of managers on sustainability assurance. When the quality of sustainability reporting is questionable because of subsequent restatements, the authors explore whether assurance is used to enhance its credibility as a legitimization tool or as an impression management strategy. Additionally, the authors analyze how capital markets react to this potential managerial capture and, particularly, whether investors penalize this practice through the cost of capital. Design/methodology/approach Using an international sample from 2012 to 2016 and panel data regressions, this study relies on DICTION’s master variables of optimism and certainty to examine the impact of managers on assurance and the market’s reaction to these practices. Findings The study shows that some managers might use assurance as a legitimization tool rather than as a means of reinforcing the credibility of sustainability reporting. In such cases, the results reveal that investors penalize (reward) managerial influence (no influence) on assurance. Practical implications The new findings help companies understand that they will not improve their financing terms if investors perceive that managers have influenced assurance. Moreover, these findings emphasize the need for standardization to clarify assurance criteria and prevent managerial influence. Social implications Managerial influence on assurance raises doubts about its value in terms of reducing information asymmetry and especially improving investors’ decision-making. Originality/value The present study represents the first evidence of the potential use of assurance for non-informative purposes. The authors provide clear evidence of how investors penalize managerial influence on assurance, in contrast to the mainstream literature, which shows that this practice always improves investors’ decision-making and is rewarded. |
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