The impact of the voluntary assurance of corporate social responsibility disclosure on earnings quality and firm value

Abstract

The independent third-party verification of CSR reports, also known as voluntary assurance, is relatively new, with research in its nascent stage. CSR reports lack a common standard and are largely unverified. Managers may use such disclosures strategically, resulting in investors finding that CSR reports lack credibility. Voluntary assurance of CSR reports potentially adds credibility. However, it is highly unregulated and lacks a common standard, thus giving plenty of opportunity to use assurance for greenwashing purposes. As yet, it is unclear as to whether assurance is being used substantively or symbolically. This thesis sheds light on the relationship between (i) voluntary assurance and earnings quality, and (ii) voluntary assurance and firm value. The thesis consists of two empirical chapters, the first of which explores the association between voluntary assurance of CSR reports and earnings management/earnings quality. Earnings quality is measured using the absolute value of abnormal working capital accruals and the absolute value of total accruals. Absolute value is used due to the income increasing and income decreasing nature of earnings management practices. The second empirical chapter explicates the relationship between the voluntary assurance of CSR reports and firm value, as proxied by industry adjusted Tobin’s Q and market to book ratio. The research is based on an international sample, covering a total of 40 different countries; it analyses whether the relationships between assurance and earnings quality, and assurance and firm value are dependent on institutional and industry settings.

Date of Award	1 Feb 2021
Original language	English
Awarding Institution	King's College London
Supervisor	Annita Florou (Supervisor) & Colin Clubb (Supervisor)