The value relevance of sustainability reporting: does assurance and the type of assurer matter?

This paper aims to investigate the relationship between sustainability reporting and firm value, and subsequently, ascertains the moderating effect of assurance and the type of assurer on the sustainability reporting–firm value nexus.

The study is based on sample firms from the Johannesburg Stock Exchange (JSE) in South Africa. The fixed‐effect panel data analysis method is used to estimate the coefficients of the variables.

A significant positive relationship is found between sustainability reporting and firm value. The results also suggest that sustainability assurance has significant explanatory power on firm value. Furthermore, the authors found that the market is unable to distinguish between sustainability assurance services provided by Big 4 audit firms and specialist consultant firms.

The authors expect managers will see sustainability reporting and assurance as a business strategy with incremental market value. The study should also serve as a reference for stakeholders engaged in the advocacy for the adoption of sustainability assurance practices on the JSE and other emerging markets.

The study finds that the South African market rewards firms that purchase third-party assurance to guarantee the integrity of their corporate social responsibility reports. This understanding could help encourage more firms to embrace the concept of sustainability assurance.

The study offers a first-hand information on how market participants in Johannesburg, an emerging economy, view sustainability assurance and the services provided by the different assurers.