Does External Assurance Enhance the Credibility of CSR Reports? Evidence from CSR-related Misconduct Events in Taiwan

Auditing: A Journal of Practice & Theory, Forthcoming

53 Pages Posted: 5 Feb 2016 Last revised: 30 Jun 2019

See all articles by Kai Du

Kai Du

Pennsylvania State University

Shing-Jen Wu

Soochow University

Date Written: February 1, 2019

Abstract

This study examines the credibility of corporate social responsibility (CSR) reports and the role of external assurance on CSR reports. Based on a sample of listed firms in Taiwan, we find that the issuance of CSR reports is not associated with a lower incidence, or frequency, of future CSR-related misconduct, unless accompanied by external assurance. In other words, external assurance can enhance the credibility of CSR reports. Moreover, the perceived credibility of CSR reports depends on whether firms genuinely fulfill their CSR commitments. For first-time offenders, prior CSR reports play a significant role in protecting firm value when misconduct does occur; however, for repeat offenders, such an insurance role does not exist, regardless whether the CSR report is assured or not. Our findings attest to the benefits of CSR assurance and underscore the importance of understanding CSR practice in the context of country-specific institutions.

Keywords: corporate social responsibility (CSR) reports; external assurance; misconduct; market reaction.

JEL Classification: M14, M41, M42

Suggested Citation

Du, Kai and Wu, Shing-Jen, Does External Assurance Enhance the Credibility of CSR Reports? Evidence from CSR-related Misconduct Events in Taiwan (February 1, 2019). Auditing: A Journal of Practice & Theory, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2727578

Kai Du (Contact Author)

Pennsylvania State University ( email )

University Park, PA 16802
United States

Shing-Jen Wu

Soochow University ( email )

No.56, Sec. 1, Kueiyang St.
Taipei, 10048
Taiwan

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