Hostname: page-component-78c5997874-94fs2 Total loading time: 0 Render date: 2024-11-08T02:31:34.522Z Has data issue: false hasContentIssue false
  • English
  • Français

Sustainability assurance and assurance providers: Corporate governance determinants in stakeholder-oriented countries

Published online by Cambridge University Press:  12 January 2017

Jennifer Martínez-Ferrero  and
Isabel-María García-Sánchez
Jennifer Martínez-Ferrero*
Affiliation:
Instituto Multidisciplinar de Empresa (IME), Universidad de Salamanca, Campus Miguel de Unamuno, FES, Salamanca, Spain
Isabel-María García-Sánchez
Affiliation:
Instituto Multidisciplinar de Empresa (IME), Universidad de Salamanca, Campus Miguel de Unamuno, FES, Salamanca, Spain
*
Corresponding author: [email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

This paper examines the effect of corporate governance mechanisms on companies’ decision to assure their sustainability reports and their choice of assurance provider in countries with a greater stakeholder orientation. The corporate governance factors analyzed are related to the strength of the board’s monitoring function, which is determined by the size, independence and activity of the sustainability committee. The international sample consists of 610 companies operating in countries that are more stakeholder oriented from the period 2007–2014. We propose alternative logit models of analysis using the random effects estimator. Consistently with our propositions, our results provide evidence that a firm’s sustainability assurance and its choice of the accounting profession are positively associated with board independence and the activity of the sustainability committee. In addition, the empirical evidence obtained shows a U-shaped relationship between the board size and assurance issues.

Keywords

assuranceassurance providerboard of directorscorporate governancestakeholder-oriented countries
Type
Research Article
Information
Journal of Management & Organization , Volume 23 , Issue 5 , September 2017 , pp. 647 - 670
Copyright
Copyright © Cambridge University Press and Australian and New Zealand Academy of Management 2017 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Adams, C. A., & Evans, R. (2004). Accountability, completeness, credibility and the audit expectations gap. Journal of Corporate Citizenship, 2004(14), 97–115.Google Scholar
Adnan, S. M. (2009). Do culture and governance structure influence CSR reporting quality: evidence from China, India, Malaysia and the United Kingdom (Doctoral dissertation), Department of Accounting and Finance, University of Auckland, Auckland, New Zealand.Google Scholar
Aguilera, R. V., Williams, C. A., Conley, J. M., & Rupp, D. (2006). Corporate governance and social responsibility: A comparative analysis of the UK and the US. Corporate Governance: An International Review, 14(3), 147–158.Google Scholar
Allegrini, M., & Greco, G. (2013). Corporate boards, audit committees and voluntary disclosure: Evidence from Italian listed companies. Journal of Management & Governance, 17(1), 187–216.Google Scholar
Amran, A., Lee, S. P., & Devi, S. S. (2014). The influence of governance structure and strategic corporate social responsibility toward sustainability reporting quality. Business Strategy and the Environment, 23(4), 217–235.Google Scholar
Barako, D. G., & Brown, A. M. (2008). Corporate social reporting and board representation: Evidence from the Kenyan banking sector. Journal of Management & Governance, 12(4), 309–324.Google Scholar
Beasley, M.S., & Petroni, K.R. (2001). Board independence and audit-firm type. Auditing: A Journal of Practice & Theory, 20(1), 97–114.CrossRefGoogle Scholar
Boiral, O., & Gendron, Y. (2011). Sustainable development and certification practices: Lessons learned and prospects. Business Strategy and the Environment, 20(5), 331–347.CrossRefGoogle Scholar
Brammer, S. J., & Pavelin, S. (2006). Corporate reputation and social performance: The importance of fit. Journal of Management Studies, 43(3), 435–455.CrossRefGoogle Scholar
Brammer, S., & Pavelin, S. (2008). Factors influencing the quality of corporate environmental disclosure. Business Strategy and the Environment, 17(2), 120–136.Google Scholar
Cadbury, S. A. (2000). The corporate governance agenda. Corporate Governance: An International Review, 8(1), 7–15.Google Scholar
Campbell, J. L. (2007). Why would corporations behave in socially responsible ways? An institutional theory of corporate social responsibility. Academy of Management Review, 32(3), 946–967.CrossRefGoogle Scholar
Campbell, J. L., Hollingsworth, J. R., & Lindberg, L. N. (Eds.) (1991). Governance of the American Economy (Vol. 5). Cambridge: Cambridge University Press.Google Scholar
Casey, R. J., & Grenier, J. H. (2015). Understanding and contributing to the enigma of corporate social responsibility (CSR) assurance in the United States. Auditing: A Journal of Practice and Theory, 34(1), 97–130.Google Scholar
Carcello, J. V., Hermanson, D. R., Neal, T. L., & Riley, R. A. (2002). Board characteristics and audit fees*. Contemporary Accounting Research, 19(3), 365–384.Google Scholar
Cheng, M. M., Green, W. J., & Ko, J. C. W. (2014). The impact of strategic relevance and assurance of sustainability indicators on investors’ decisions. Auditing: A Journal of Practice & Theory, 34(1), 131–162.Google Scholar
Cho, K. R., Huang, C. H., & Padmanabhan, P. (2014). Foreign ownership mode, executive compensation structure, and corporate governance: has the literature missed an important link? Evidence from Taiwanese firms. International Business Review, 23(2), 371–380.Google Scholar
Clarkson, P. M., Li, Y., Richardson, G. D., & Vasvari, F. P. (2008). Revisiting the relation between environmental performance and environmental disclosure: An empirical analysis. Accounting, Organizations and Society, 33(4), 303–327.CrossRefGoogle Scholar
Cohen, J., Holder-Webb, L., Nath, L., & Wood, D. (2011). Retail investors’ perceptions of the decision-usefulness of economic performance, governance, and corporate social responsibility disclosures. Behavioral Research in Accounting, 23(1), 109–129.Google Scholar
Cohen, J. R., & Simnett, R. (2015). A forum on CSR and assurance services introduction, American Accounting Association.Google Scholar
da Silva Monteiro, S. M., & Aibar‐Guzmán, B. (2010). Determinants of environmental disclosure in the annual reports of large companies operating in Portugal. Corporate Social Responsibility and Environmental Management, 17(4), 185–204.Google Scholar
Dalton, D. R., Daily, C. M., Ellstrand, A. E., & Johnson, J. L. (1998). Meta-analytic reviews of board composition, leadership structure, and financial performance. Strategic Management Journal, 19(3), 269–290.Google Scholar
de Andrés, P., & Vallelado, E. (2008). Corporate governance in banking: The role of the board of directors. Journal of Banking & Finance, 32(12), 2570–2580.Google Scholar
Deegan, C., Cooper, B. J., & Shelly, M. (2006). An investigation of TBL report assurance statements: UK and European evidence. Managerial Auditing Journal, 21(4), 329–371.Google Scholar
Dhaliwal, D. S., Radhakrishnan, S., Tsang, A., & Yang, Y. G. (2012). Nonfinancial disclosure and analyst forecast accuracy: International evidence on corporate social responsibility disclosure. The Accounting Review, 87(3), 723–759.Google Scholar
DiMaggio, P. J., & Powell, W. W. (1983). The iron cage revised: Institutional isomorphism and collective rationality in organizational fields. American Sociological Review, 48(2), 147–160.Google Scholar
Doidge, C., Karolyi, G. A., & Stulz, R. M. (2007). Why do countries matter so much for corporate governance? Journal of Financial Economics, 86(1), 1–39.Google Scholar
Dwivedi, N., & Jain, A. K. (2005). Corporate governance and performance of Indian firms: The effect of board size and ownership. Employee Responsibilities and Rights Journal, 17(3), 161–172.Google Scholar
Eccles, R. G., & Krzus, M. P. (2010). Integrated reporting for a sustainable strategy: One Report has the potential to significantly change how companies operate and investors think, shifting the focus from that of meeting short-term financial goals to developing a long-term business strategy that not only makes a commitment to corporate social responsibility, but also to a sustainable society. Financial Executive, 26(2), 28–33.Google Scholar
Fernandez-Feijoo, B., Romero, S., & Ruiz, S. (2014). Effect of stakeholders’ pressure on transparency of sustainability reports within the GRI framework. Journal of Business Ethics, 122(1), 53–63.Google Scholar
Fifka, M. S. (2013). Corporate responsibility reporting and its determinants in comparative perspective – a review of the empirical literature and a meta‐analysis. Business Strategy and the Environment, 22(1), 1–35.Google Scholar
Francis, J. R. (2004). What do we know about audit quality? British Accounting Review, 36(4), 345–358.Google Scholar
Francis, J. R. (2011). A framework for understanding and researching audit quality. Auditing: A Journal of Practice & Theory, 30(2), 125–152.CrossRefGoogle Scholar
Francis, J. R., Khurana, I. K., Martin, X., & Pereira, R. (2011). The relative importance of firm incentives versus country factors in the demand for assurance services by private entities*. Contemporary Accounting Research, 28(2), 487–516.Google Scholar
Franks, J., Mayer, C., & Renneboog, L. (2001). Who discipline management in poorly performing companies. Journal of Financial Intermediation, 10, 209–248.Google Scholar
Frías-Aceituno, J. V., Rodríguez-Ariza, L., & García-Sánchez, I. M. (2013). Is integrated reporting determined by a country’s legal system? An exploratory study. Journal of Cleaner Production, 44, 45–55.Google Scholar
García Sánchez, I. M., Rodríguez Domínguez, L., & Gallego Álvarez, I. (2011). Corporate governance and strategic information on the internet: A study of Spanish listed companies. Accounting, Auditing & Accountability Journal, 24(4), 471–501.Google Scholar
Garcia-Sanchez, I., Cuadrado-Ballesteros, B., & Frias-Aceituno, J. (2015). Impact of the institutional macro context on the voluntary disclosure of CSR information. Long Range Planning, 49(1), 15–35.CrossRefGoogle Scholar
Garcia-Sanchez, I. M., Cuadrado-Ballesteros, B., & Sepulveda, C. (2014). Does media pressure moderate CSR disclosures by external directors? Management Decision, 52(6), 1014–1045.Google Scholar
Goodstein, J., Gautam, K., & Boeker, W. (1994). The effects of board size and diversity on strategic change. Strategic Management Journal, 15(3), 241–250.Google Scholar
Gray, R. (2000). Current developments and trends in social and environmental auditing, reporting and attestation: A review and comment. International Journal of Auditing, 4, 247–268.CrossRefGoogle Scholar
Green, W. H. (1999). Econometric Analysis. New Jersey: Prentice Hall.Google Scholar
Haniffa, R. M., & Cooke, T. E. (2005). The impact of culture and governance on corporate social reporting. Journal of Accounting and Public Policy, 24(5), 391–430.Google Scholar
Hair, J. F., Black, W. C., Babin, B. J., & Anderson, R. E. (1998). Multivariate Data Analysis. New Jersey: Prentice-Hall.Google Scholar
Hang, H., Cheng, M., & Gray, S. J. (2007). Corporate governance and board composition: Diversity and independence of Australian boards. Corporate Governance, 15(2), 194–207.Google Scholar
Hasan, M., Roebuck, P. J., & Simnett, R. (2003). An investigation of alternative report formats for communicating moderate levels of assurance. Auditing: A Journal of Practice & Theory, 22(2), 171–187.Google Scholar
Herda, D. N., Taylor, M. E., & Winterbotham, G. (2014). The effect of country‐level investor protection on the voluntary assurance of sustainability reports. Journal of International Financial Management & Accounting, 25(2), 209–236.Google Scholar
Hillier, D., Pindado, J., De Queiroz, V., & De La Torre, C. (2011). The impact of country-level corporate governance on research and development. Journal of International Business Studies, 42(1), 76–98.Google Scholar
Hodge, K., Subramaniam, N., & Stewart, J. (2009). Assurance of sustainability reports: Impact on report users’ confidence and perceptions of information credibility. Australian Accounting Review, 19(3), 178–194.Google Scholar
Huggins, A., Green, W. J., & Simnett, R. (2011). The competitive market for assurance engagements on greenhouse gas statements: Is there a role for assurers from the accounting profession? Current Issues in Auditing, 5(2), A1–A12.Google Scholar
Ibrahim, N. A., Howard, D. P., & Angelidis, J. P. (2003). Board members in the service industry: An empirical examination of the relationship between corporate social responsibility orientation and directional type. Journal of Business Ethics, 47(4), 393–401.Google Scholar
Kend, M. (2015). Governance, firm-level characteristics and their impact on the client’s voluntary sustainability disclosures and assurance decisions. Sustainability Accounting, Management and Policy Journal, 6(1), 54–78.Google Scholar
Khan, A., Muttakin, M. B., & Siddiqui, J. (2013). Corporate governance and corporate social responsibility disclosures: Evidence from an emerging economy. Journal of Business Ethics, 114(2), 207–223.Google Scholar
Knechel, W. R., Wallage, P., Eilifsen, A., & Van Praag, B. (2006). The demand attributes of assurance services providers and the role of independent accountants. International Journal of Auditing, 10, 143–162.Google Scholar
Kolk, A., & Perego, P. (2010). Determinants of the adoption of sustainability assurance statements: An international investigation. Business Strategy and the Environment, 19(3), 182–198.Google Scholar
KPMG (2002). KPMG International Survey of Corporate Sustainability Reporting 2002. Amsterdam: KPMG Global Sustainability Services.Google Scholar
KPMG (2013). The KPMG Survey of Corporate Responsibility Reporting 2013. Amsterdam: KPMG Global Sustainability Services.Google Scholar
La Porta, R., Lopez-de-Silanes, F., Shleifer, A., & Vishny, R. W. (1997). Legal determinants of external finance. Journal of Finance, 52(3), 1131–1150.Google Scholar
La Porta, R., López de Silanes, F., Shleifer, A., & Vishny, R. (1998). Law and finance. Journal of Political Economy, 106, 1113–1155.Google Scholar
La Porta, R., Lopez‐de‐Silanes, F., & Shleifer, A. (2002). Government ownership of banks. The Journal of Finance, 57(1), 265–301.Google Scholar
Liao, L., Luo, L., & Tang, Q. (2015). Gender diversity, board independence, environmental committee and greenhouse gas disclosure. The British Accounting Review, 47(4), 409–424.Google Scholar
Lim, S., Matolcsy, Z., & Chow, D. (2007). The association between board composition and different types of unitary disclosure. European Accounting Review, 16(3), 555–583.Google Scholar
Martínez-Ferrero, J., & García-Sánchez, I. M. (2017). Coercive, normative and mimetic isomorphism as determinants of the voluntary assurance of sustainability reports. International Business Review, 26(1), 102–118.Google Scholar
Meyer, J. W., & Rowan, B. (1977). Institutionalized organizations: Formal structure as myth and ceremony. American Journal of Sociology, 83(2), 340–363.Google Scholar
Michelon, G., & Parbonetti, A. (2012). The effect of corporate governance on sustainability disclosure. Journal of Management & Governance, 16(3), 477–509.Google Scholar
Mintzberg, H. (1993). Structure in Fives: Designing Effective Organizations. New York: Prentice-Hall Inc.Google Scholar
Mock, T. J., Strohm, C., & Swartz, K. M. (2007). An examination of worldwide assured sustainability reporting. Australian Accounting Review, 17(41), 67–77.Google Scholar
Morimoto, R., Ash, J., & Hope, C. (2005). Corporate social responsibility audit: From theory to practice. Journal of Business Ethics, 62(4), 315–325.Google Scholar
Moroney, R., Windsor, C., & Aw, Y. T. (2012). Evidence of assurance enhancing the quality of voluntary environmental disclosures: An empirical analysis. Accounting & Finance, 52(3), 903–939.Google Scholar
O’Dwyer, B., & Owen, D. L. (2005). Assurance statement practice in environmental, social and sustainability reporting: A critical evaluation. The British Accounting Review, 37(2), 205–229.Google Scholar
O’Dwyer, B., Owen, D., & Unerman, J. (2011). Seeking legitimacy for new assurance forms: The case of assurance on sustainability reporting. Accounting, Organizations and Society, 36(1), 31–52.Google Scholar
Patelli, L., & Prencipe, A. (2007). The relationship between voluntary disclosure and independent directors in the presence of a dominant shareholder. European Accounting Review, 16(1), 5–33.Google Scholar
Pearce, J. A., & Zahra, S. A. (1992). Board composition from a strategic contingency perspective. Journal of Management Studies, 29(4), 411–438.Google Scholar
Perego, P. (2009). Causes and consequences of choosing different assurance providers: An international study of sustainability reporting. International Journal of Management, 26(3), 412–425.Google Scholar
Perego, P., & Kolk, A. (2012). Multinationals’ accountability on sustainability: The evolution of third-party assurance of sustainability reports. Journal of Business Ethics, 110(2), 173–190.Google Scholar
Peters, G. F., & Romi, A. M. (2012). The effect of corporate governance on voluntary risk disclosures: Evidence from greenhouse gas emission reporting. (http://Www. Business. Utah. Edu/Sites/Default/Files/Documents/School-of-Accounting/Ghg_Disclosure_and_Corp_Gov_20120202.Pdf).Google Scholar
Peters, G. F., & Romi, A. M. (2014). The association between sustainability governance characteristics and the assurance of corporate sustainability reports. Auditing: A Journal of Practice & Theory, 34(1), 163–198.Google Scholar
Peters, G. F., & Romi, A. M. (2015). The association between sustainability governance characteristics and the assurance of corporate sustainability reports. Auditing: A Journal of Practice and Theory, 34(1), 163–198.Google Scholar
Pflugrath, G., Roebuck, P., & Simnett, R. (2011). Impact of assurance and assurer’s professional affiliation on financial analysts’ assessment of credibility of corporate social responsibility information. Auditing: A Journal of Practice & Theory, 30(3), 239–254.Google Scholar
Post, J. E., Preston, L., & Sachs, S. (2002). Managing the extended enterprise: The new stakeholder view. California Management Review, 45(1), 6–29.Google Scholar
Power, M. K. (2003). Auditing and the production of legitimacy. Accounting, Organizations and Society, 28(4), 379–394.Google Scholar
Ravina, E., & Sapienza, P. (2010). What do independent directors know? Evidence from their trading. Review of Financial Studies, 23(3), 962–1003.Google Scholar
Richardson, A. J., & Welker, M. (2001). Social disclosure, financial disclosure and the cost of equity capital. Accounting, Organizations and Society, 26, 597–616.Google Scholar
Rupley, K. H., Brown, D., & Marshall, R. S. (2012). Governance, media and the quality of environmental disclosure. Journal of Accounting and Public Policy, 31, 610–640.Google Scholar
Samaha, K., Dahawy, K., Hussainey, K., & Stapleton, P. (2012). The extent of corporate governance disclosure and its determinants in a developing market: The case of Egypt. Advances in Accounting, 28(1), 168–178.Google Scholar
Simnett, R., Vanstraelen, A., & Chua, W. F. (2009). Assurance on sustainability reports: An international comparison. The Accounting Review, 84(3), 937–967.Google Scholar
Smith, J., Haniffa, R., & Fairbrass, J. (2011). A conceptual framework for investigating ‘capture’ in corporate sustainability reporting assurance. Journal of Business Ethics, 99(3), 425–439.Google Scholar
Tagesson, T., Blank, V., Broberg, P., & Collin, S. O. (2009). What explains the extent and content of social and environmental disclosures on corporate websites: A study of social and environmental reporting in Swedish listed corporations. Corporate Social Responsibility and Environmental Management, 16(6), 352–364.Google Scholar
Weber, J. (2014). Corporate social responsibility disclosure level, external assurance and cost of equity capital. External Assurance and Cost of Equity, Capital accessed on 16 December 2014.Google Scholar
Wong, R., & Millington, A. (2014). Corporate social disclosures: A user perspective on assurance. Accounting, Auditing & Accountability Journal, 27(5), 863–887.CrossRefGoogle Scholar
Zhou, S., Simnett, R., & Green, W. (2013). The effect of legal environment and corporate governance on the decision to assure and assurance provider choice: Evidence from the GHG Assurance Market. UNSW Australian School of Business Research Paper, Sydney, Australia, 2012.Google Scholar