The Impact of Voluntary Sustainability Reporting on Firm Value: Insights From Signaling Theory Wesley Friske, Seth A. Hoelscher, and Atanas Nik Nikolov
Journal of the Academy of Marketing Science, Vol. 51, 372-392(2023)
OVERVIEW
This study examined the relationship between voluntary sustainability reporting and firm financial value. We test three main hypotheses developed from signaling theory and the sustainability reporting literature on a large panel of reporting and non-reporting organizations for the 2011–2020 period. The results of a fixed effects panel model suggest that, in general, sustainability reporting is negatively related to financial value. However, the results also indicate that the relationship between sustainability reporting and value becomes increasingly positive over time. We conclude that sustainability reporting is initially a costly signal, but it eventually enhances firm value as companies learn how to better communicate sustainability initiatives to stakeholders and investors learn how to properly evaluate reports. Finally, in an analysis of sustainability reporting organizations, we find that external assurance of sustainability reports is positively associated with firm financial value. External audits appear to increase the credibility of reports. Implications for marketing theory and practice are discussed.
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