The Effect of Ownership Structure on the Sustainability Reporting Assurance Practice, A Quantitative Study on Factors Influencing the Choice of Sustainability Reporting Assurance in a Swedish Setting

Abstract: The increasing amount of firms choosing to present corporate social responsibility (CSR) disclosures has led to an increased demand for reliability and credibility of sustainability reports. From an agency theory perspective, involving a third-party to verify the reliability of a firm's CSR report through a sustainability reporting assurance (SRA), can reduce the information asymmetry between a firm's management and its owners. We use logistic regressions with a sample of the listed firms on NASDAQ Stockholm (small, mid and large cap) in the year- end 2013 to determine factors that influence the choice of applying SRA. Especially, we focus on the effects of institutional investors and majority owners in order to investigate if ownership structure has an impact on the use of SRA. Our findings show a positive relationship between the probability of using SRA and institutional ownership, indicating that a higher level of institutional ownership increases the likelihood that a firm applies assurance on its CSR report. No statistically significant relation is found between having a majority owner and the decision to apply SRA. In an extended analysis, we raise the question of the investor's identity's impact on the choice of SRA. Our findings suggest that private institutional investors seem to have a positive influence on the decision, while public institutional investors seem to have a negative influence.