Voluntary Assurance of Voluntary CSR Disclosure

We study a firm's decisions to engage in socially responsible activities, voluntarily report on them, and purchase external assurance of the report. In our signaling model, neither firm type nor the level of activity is observed. We show that if voluntary assurance is not too expensive, the fir...

Full description

Saved in:
Bibliographic Details
Published in:Journal of economics & management strategy 2017-04, Vol.26 (1), p.205-230
Main Authors: Bagnoli, Mark, Watts, Susan G.
Format: Article
Language:English
Subjects:
Activists
Assurance services
Corporate responsibility
Decision making
Disclosure
Equilibrium
Social activism
Social responsibility
Studies
Sustainability reporting
Voluntary
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:We study a firm's decisions to engage in socially responsible activities, voluntarily report on them, and purchase external assurance of the report. In our signaling model, neither firm type nor the level of activity is observed. We show that if voluntary assurance is not too expensive, the firm that engages in more socially responsible activities purchases external assurance and thus “selects” a separating equilibrium. As a result, CSR reports can be used to infer the level of activity and this causes all firms to engage in more socially responsible activity. Further, when voluntary assurance is required to support a separating equilibrium, greater monitoring by social activists increases the chosen quality of voluntary assurance—voluntary assurance and monitoring by social activists are complements, not substitutes.
ISSN:1058-6407
1530-9134
DOI:10.1111/jems.12171