Assurance of corporate social responsibility reports: Examining the role of internal and external corporate governance mechanisms

Abstract

This article examines the effects of various internal (board independence, gender diversity, and specialized sustainability committee) and external (analysts' coverage and institutional ownership) corporate governance mechanisms on firms' decision to purchase external assurance for their corporate social responsibility (CSR) report. Using an international sample, we show that board diversity, the existence of a CSR committee, analysts' coverage, and institutional investors increase the probability of assuring a CSR report, while board independence decreases it. The findings further suggest that several configurations of these mechanisms complement each other in improving the credibility of nonfinancial disclosure through assurance. However, other configurations do not work in tandem, supporting the existence of substitution effects. Overall, bundling various governance mechanisms effectively could be more useful in formulating and implementing a corporate strategy than individual mechanisms.

The role of the audit committee in enhancing the credibility of CSR disclosure: Evidence from STOXX Europe 600 members

“…The outcomes align with the complementary impact between AC strength and CSRA adoption offered by accountancy firms. Our findings also contribute to legitimacy theory; good CG structure and CSRA are considered essential tools in fulfilling the social needs that guarantee a company's survival, in association with the goals of the society in which it is placed (García‐Sánchez et al, 2021). The study's primary practical implication for regulators and policymakers of European companies is that they would recognise how the strength of AC structure affects CSRA aspects.…”

Assurance of corporate social responsibility reports: Does it reduce decoupling practices?

“…Accordingly, apart from the issue of whether CSR reports are assured, the effect of assurance quality and an assurance provider's characteristics should also be considered (García-Sánchez, Aibar-Gúzman, et al, 2021;García-Sánchez et al, 2021b;Kolk & Perego, 2010;Zhou et al, 2013).…”

Evaluating board diversity and its importance in the environmental and social performance of organizations

“…Directors influence critical strategic decisions taken by boards (Chang et al, 2017; García‐Sánchez et al, 2021; Kim et al, 2009; Setó‐Pamies, 2015). Decisions are cognitive and are primarily influenced by demographic factors of board members including their gender, education, age, and tenure (Kagzi & Guha, 2018).…”