Influence of firms’ financial performance on disclosure of sustainability initiatives and assurance of sustainability reports

Abstract

This study provides a better understanding of the possible influence of firms’ financial performance on the disclosure of sustainability initiatives and assurance of sustainability reports (Perego & Kolk, 2012). The study analyzes the use of Big4 accounting, engineering, and boutique/consultancy firms for assurance of sustainability reports. A total of 2084 sustainability reports from 42 different countries were retrieved from the Global Reporting Initiative and the corresponding financial variables were obtained from the S&P Capital IQ database. Multilevel logistic regression analysis was undertaken to investigate the issue. We hypothesize that companies with higher financial performance will be more likely to choose an assurance provider from the Big4 (Carey, Simnett, & Tanewski, 2000). While we find that higher financial performers are no different from other performers (as proxied by EVA, TEV, or ROS) when it comes to Big4, we do find that engineering firms are approximately seven times more likely to be chosen as an assurance provider, after controlling for other variables (when EVA and TEV (not ROS) is used as a proxy for financial performance). Importantly, the number of employees and being in the manufacturing industry are significantly related to choosing an engineering firm as an assurance provider when EVA or TEV is used as a proxy for financial performance, and significantly related to choosing a boutique/consultancy firm when ROS is used as a proxy for financial performance.