Title: The signalling role of voluntary ESG assurance

Authors: Zelalem Abay

Addresses: School of Business, Economics and Law, University of Gothenburg, Vasagatan 1, P.O. Box 610, 40530, Gothenburg, Sweden

Abstract: The aim of this study is to examine the role of independent third-party environment, social, and governance (ESG) assurance in signalling higher ESG performance. While testing the hypothesis, a liner regression is applied using data from Thomson Reuters ESG scores and global reporting initiative database from a sample of 645 unique European firms over the period of 2012-2017. Firms with third-party assurance are found to have a significantly higher ESG performance than firms with no assurance. This study offers new evidence on the signalling value of an independent third party ESG assurance in differentiating ESG performances and confirms the incentive that high performing firms could use to separate from their counterparts with poor performance in a separating equilibrium.

Keywords: ESG; non-financial disclosure; signalling theory; voluntarily; assurance.

DOI: 10.1504/IJMFA.2022.123887

International Journal of Managerial and Financial Accounting, 2022 Vol.14 No.3, pp.265 - 294

Received: 25 Feb 2021
Accepted: 25 Jan 2022
Published online: 04 Jul 2022 *

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