Does Sustainability Assurance Improve Managerial Investment Decisions?

European Accounting Review, 2019, Vol. 28, No. 1, pp. 177-209.

Posted: 5 Jan 2021

See all articles by Maria C. Stich

Maria C. Stich

Technische Universität München (TUM)

Michael W. Stich

Technische Universität München (TUM)

Date Written: 2019

Abstract

This study analyzes the effect of sustainability assurance (SA) on managerial investment decisions in terms of sustainability investment (SI) efficiency. We hypothesize that SA improves the set of information available for managerial decision making, resulting in higher SI efficiency. Further, we argue that SA reduces information asymmetry between managers and investors, which enables investors to more effectively monitor a firm’s management, thus again leading to higher SI efficiency. Empirical findings for an international sample support these links. Moreover, we find weak evidence that SA provided by an auditor is associated with a stronger effect on SI efficiency. In additional analyses, we find weak evidence that the association of SA and SI efficiency is more pronounced if the SA is provided on a higher scope, on a higher level, and if other governance mechanisms are weak.

Keywords: Sustainability assurance, managerial investment decisions, investment efficiency, sustainability investing

JEL Classification: M10, M14, M42

Suggested Citation

Stich, Maria C. and Stich, Michael W., Does Sustainability Assurance Improve Managerial Investment Decisions? (2019). European Accounting Review, 2019, Vol. 28, No. 1, pp. 177-209., Available at SSRN: https://ssrn.com/abstract=3721882

Maria C. Stich

Technische Universität München (TUM) ( email )

Arcisstrasse 21
Munich, DE 80333
Germany

Michael W. Stich (Contact Author)

Technische Universität München (TUM) ( email )

Arcisstrasse 21
Munich, DE 80333
Germany

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