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

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.