The Role of Information Asymmetries in Firms' Voluntary Decertification from Private Standards

40 Pages Posted: 18 Mar 2021

See all articles by Ivan Montiel

Ivan Montiel

Zicklin School of Business, Department of Management, Baruch College - The City University of New York

Remy Balarezo

Universidad de Piura

Elena Vidal

City University of NY, Baruch College, Zicklin School of Business

Petra Christmann

Rutgers, The State University of New Jersey - Rutgers University, Newark

Date Written: February 2, 2021

Abstract

Firms pursue third-party certification to private standards to reduce firm-level information asymmetries of certain unobservable characteristics and thus obtain legitimacy. However, when the private standard’s legitimacy dilutes, those same firms have reasons to abandon certifications voluntarily – i.e., decertify. Yet our inductive decertification study reveals a more complex set of dynamics beyond legitimacy dilution, which also facilitates decertification behavior. We identify certification-level information asymmetries associated with the ambiguity of the certification per-se that allows firms to act opportunistically and decertify silently. Finally, our findings also unveil that even in the absence of certification-level information asymmetries between the firm and certain stakeholders, firms are oftentimes granted certification waivers, which create an easier path towards decertification.

Keywords: information asymmetries, legitimacy, private standards, decertification

Suggested Citation

Montiel, Ivan and Balarezo, Remy and Vidal, Elena and Christmann, Petra, The Role of Information Asymmetries in Firms' Voluntary Decertification from Private Standards (February 2, 2021). Available at SSRN: https://ssrn.com/abstract=3778239 or http://dx.doi.org/10.2139/ssrn.3778239

Ivan Montiel (Contact Author)

Zicklin School of Business, Department of Management, Baruch College - The City University of New York ( email )

NY
United States

Remy Balarezo

Universidad de Piura ( email )

Piura
Peru

Elena Vidal

City University of NY, Baruch College, Zicklin School of Business ( email )

One Bernard Baruch Way
New York, NY 10010
United States

Petra Christmann

Rutgers, The State University of New Jersey - Rutgers University, Newark ( email )

180 University Avenue
Newark, NJ 07102
United States

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