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Is tenure important in the sustainability assurance context? An empirical analysis of the informative value of assurance statements

Emiliano Ruiz-Barbadillo (Department of Financial Economics and Accounting, Universidad de Cadiz, Cadiz, Spain)
Jennifer Martinez-Ferrero (Multidisciplinary Institute for Enterprise (IME), Universidad de Salamanca, Salamanca, Spain)

Meditari Accountancy Research

ISSN: 2049-372X

Article publication date: 5 September 2022

Issue publication date: 13 October 2023

435

Abstract

Purpose

This paper aims to examine the communicative value of assurance reports by investigating whether the impact on information asymmetries is contingent on the length of the contractual relationship between clients and assurance providers, which can compromise the provider’s independence.

Design/methodology/approach

Using a firm-level data set of publicly listed international firms from 2007 to 2016, the authors estimate several regression models for panel data by using the generalized method of moments estimator to address the endogeneity issue.

Findings

Results find that the greater the communicative value in assurance statements, the lower the information asymmetries. However, this effect is constrained when the assurance provider’s independence is compromised due to an excessively long-term contractual relationship. In other words, assurance statements with more informative value enhance the firm’s transparency and increase users’ confidence in the sustainability information provided. However, the loss of independence linked to longer tenure jeopardizes the communicative value of the assurance report and contributes to reducing information asymmetries.

Originality/value

The study makes at least three clear contributions to current literature. First, the authors contribute to the limited existing research about the communicative value attributed to assurance statements by stakeholders. Second, the authors indirectly contribute to the literature that analyses whether stakeholders understand the assurance report, a complex statement in a growing market. Addressing the communicative value of assurance is certainly a difficult task, as it is a novel and complex activity. Third, the main contribution is providing initial empirical evidence about the moderating effect that assurance provider tenure has in the relationship between the informational content of the assurance report and the level of information asymmetries. To date, there is no empirical evidence regarding the moderating effect of long assuror’s tenure as an important feature of the assurance market, and beyond that, regarding its impact on the communicative value assigned by stakeholders to assurance statements.

Keywords

Acknowledgements

The authors are grateful to the Junta de Castilla y León and the European Regional Development Fund (Grant CLU-2019-03) for the financial support to the Research Unit of Excellence “Economic Management for Sustainability” (GECOS). The authors are grateful to the Ministerio de Ciencia e Innovación [Grant/Award No. GELESMAT - PID2021-122419OB-I00] for the financial support.

Citation

Ruiz-Barbadillo, E. and Martinez-Ferrero, J. (2023), "Is tenure important in the sustainability assurance context? An empirical analysis of the informative value of assurance statements", Meditari Accountancy Research, Vol. 31 No. 5, pp. 1483-1517. https://doi.org/10.1108/MEDAR-01-2022-1580

Publisher

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Emerald Publishing Limited

Copyright © 2022, Emerald Publishing Limited

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