Does Sustainability Report Assurance Affect the Cost of Equity? The Role of Peer Behavior and Assurance Provider Characteristics La certification des rapports de durabilité a-t-elle une incidence sur le coût des capitaux propres? Rôle du comportement des pairs et des caractéristiques des certificateurs

Abstract

We investigate the impact of sustainability report assurance and assurance provider characteristics (i.e., Big 4, statutory auditor, and industry specialist) on the cost of equity in a setting in which reporting is mandatory and assurance is voluntary. Furthermore, we analyze the impact of peer behavior on these relationships, where peer behavior is defined as the proportion of other companies in the same industry and year that also opt for voluntary assurance or choose an assurance provider with the same characteristics. Our sample consists of German CDAX companies for the period 2017–2022. The results suggest that voluntary sustainability report assurance reduces the cost of equity, but this depends on peer behavior. Specifically, the cost-of-equity-reducing effect of voluntarily choosing assurance or choosing the statutory auditor as assurance provider is diminished as more peers choose assurance or choose their statutory auditor, respectively.