Role Of Assurance On The Enhancement Of Value-Relevance Of Corporate Social Responsibility Disclosure

Abstract

Investors have become increasingly aware that annual financial reporting alone cannot provide all salient information about a firm. The non-financial information such as CSR information is also important and useful. However, the disclosure of non-financial information, especially the separate CSR report, is voluntary. In addition, the assurance for CSR reporting is also currently the firm’s voluntary. Therefore, this research aims to investigate whether the disclosure of CSR represents the value-relevant information for investors and to investigate whether the assurance of CSR disclosure also represents the value-relevant information. Unlike prior studies which focused on the availability of assurance statement, this research further explores whether investors value the content of assurance statements. In addition, this research also investigates about the type of assurance providers and the level of assurance. The samples used in this research are the firms listed in the London Stock Exchange Market (FTSE) from 2011 to 2015. The results reveal that the availability of CSR disclosure which is a type of non-financial information positively associated to a firm’s market value. This implied that not only financial information, investors also value non-financial information such as CSR information. In addition, the results show that both the availability of assurance statements and the content indicated in assurance statements provided value-relevant information for investors. This implied that the assurance enhances value-relevance of CSR disclosure and investors value substance of CSR assurance statement as well as its form. Moreover, the result shows that type of assurance providers appeared to affect firm’s market value. This implies that investors perceive the assurance statement as more valuable when it is provided by accounting professionals (e.g. auditors). However, the result does not show any significant effect of level of assurance to firm’s market value.