Does external assurance on CSR reporting contribute to its higher quality? Empirical evidence from China


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This paper examines the difference that the assurance brings to the quality of CSR reports in the Chinese institutional setting, in particular, the difference in quality (proxy – RKS ranking) of assured and unassured CSR reports, as well as whether the high ownership concentration and corresponding to it “entrenchment effect” obstruct the positive impact the assurance exerts on the quality of CSR reports. The paper examines CSR reports on 2,292 firm-year observations of large Chinese companies over three years (2015–2018). The hypothesis development process predicates on the signaling and stakeholder theories, whilst this study applies regression analysis to test the hypotheses.
Consistent with the predictions of signaling and stakeholder theories, the paper finds that assurance contributes to the higher quality of CSR reports. Moreover, the study finds that assured CSR reports have higher sub-scores in all four aspects of RKS ranking. However, as ownership concentration exceeds 50 per cent and reaches the majority, it thwarts the advancement in the quality of CSR reports through its assurance.
The paper provides an initial empirical account of the role of assurance in the emerging CSR reporting practice in China. The paper contributes to the modest body of empirical research on the function of external assurance in the CSR area by explicating the role played both by the accounting (external assurance) and corporate governance (ownership concentration) infrastructure to ensure high quality of CSR reporting. The paper briefs local, international regulatory authorities and the business community about the importance of external assurance for the CSR reporting quality.

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    • Figure 1. Evolution of CSR rankings by RKS
    • Figure 2. Indicators and sub-indicators of the RKS rating system, MCT 2012_1.2i version
    • Table 1. Sample selection procedure
    • Table 2. Descriptive statistics
    • Table 3. Correlation analysis
    • Table 4. Differences between companies on dummy variables: Audit and State
    • Table A1. Prior studies on the effect of CSRA on CSRR quality*
    • Table A2. Description of variables used in the study
    • Table A3. Regression analysis
    • Conceptualization
      Oleh Pasko, Dmytro Nikytenko
    • Investigation
      Oleh Pasko, Li Zhang, Kostiantyn Bezverkhyi, Dmytro Nikytenko, Lyudmyla Khromushyna
    • Methodology
      Oleh Pasko, Kostiantyn Bezverkhyi
    • Project administration
      Oleh Pasko, Li Zhang
    • Supervision
      Oleh Pasko
    • Visualization
      Oleh Pasko, Li Zhang, Lyudmyla Khromushyna
    • Writing – original draft
      Oleh Pasko
    • Writing – review & editing
      Oleh Pasko
    • Data curation
      Li Zhang, Kostiantyn Bezverkhyi
    • Formal Analysis
      Li Zhang, Dmytro Nikytenko, Lyudmyla Khromushyna
    • Validation
      Kostiantyn Bezverkhyi, Dmytro Nikytenko, Lyudmyla Khromushyna