Towards Enhanced Sustainability Reporting Credibility: The Role of National Governance in Europe

Drawing on institutional theory, this study investigates the impact of national governance (i.e., voice and accountability, political stability, government effectiveness, regulatory quality, rule of law, and control of corruption) on companies' decisions to acquire sustainability assurance (SA) reports. The sample includes 6367 firm-year observations from 21 European countries between 2010 and 2021. A panel regression analysis using a logistic model is applied to test the hypotheses. Our results show that voice and accountability, political stability, regulatory quality, and the rule of law have a significant and positive impact on SA. On the other hand, government effectiveness and control of corruption have no influence on SA. The results are robust after several sensitivity analyses. Overall, the findings highlight the importance of national-level reforms to enhance governance features that augment the credibility of sustainability reporting. Stakeholders and investors can use governance indicators to identify companies most likely to adopt quality assurance. In addition, the study provides policy recommendations to support European sustainability goals through targeted governance improvements.