Corporate social responsibility disclosure level, external assurance and cost of equity capital

Purpose - This study aims to analyze whether corporate social responsibility (CSR) report characteristics, including disclosure level and external assurance, and reporting firms’ CSR performance, explain variation in cost of equity capital among CSR disclosers. Design/methodology/approach - The study uses a propensity score matched sample of CSR reports prepared according to the Global Reporting Initiative’s (GRI) G3/G3.1 Reporting Guidelines. Findings - Overall, there does not appear to be a difference in cost of equity capital among CSR disclosers based on GRI disclosure level. The exception is for poor CSR performers reporting at the highest GRI disclosure levels, but not obtaining assurance. These firms may be suspected of greenwash and therefore have higher cost of equity capital than the reference group. Poor CSR performers, especially those reporting at the highest GRI disclosure levels, obtain the greatest cost of equity capital benefit associated with external assurance. Originality/value - This study contributes to the literature by showing that the cost of equity capital benefits associated with CSR disclosure and assurance do not accrue equally to all CSR disclosers. Specifically, this study is the first to provide empirical evidence of the cost of equity capital consequences of suspected greenwashing and empirically demonstrate the role of external assurance in mitigating greenwashing concerns among poor performers.