Sustainability reporting and external assurance: evidence from UK listed firms

<p dir="ltr">This paper aims to develop and test a model which explains why some companies obtain external assurance for their sustainability report while others do not. Our model combines rational choice and stakeholder theories to offer new insights into sustainability assurance literature. Using an online questionnaire, we gathered data from 105 UK-listed companies and employed partial least squares structural equation modelling PLS-SEM to test our model. We observed a direct positive (negative) influence of decision makers’ perceived benefits (costs) of external assurance. We identified an indirect positive impact from external assurer independence and market competition, and an indirect negative impact from adherence to sustainability reporting guidelines, through perceived benefits. Further, we found a direct positive impact of institutional investors on external assurance decision. Interestingly, it appears that decision makers' perception of benefits and costs diminished when institutional investors demand external sustainability assurance. Our results shed light on the integration of rational choice and stakeholder theories when discussing obtaining sustainability assurance. Furthermore, our study holds implications for academics, business decision makers, external sustainability assurance providers and policy makers in external sustainability assurance.</p>