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JFRA
17,2
320
Received 16 February 2018
Revised 18 August 2018
Accepted 24 October 2018
Journal of Financial Reporting and
Accounting
Vol. 17 No. 2, 2019
pp. 320-342
© Emerald Publishing Limited
1985-2517
DOI 10.1108/JFRA-02-2018-0019
An empirical investigation of
determinants of sustainability
report assurance in France
Yosra Mnif Sellami
Department of Accounting Taxation and Law,
High Institute of Business Administration of Sfax, Sfax, Tunisia
Nada Dammak Ben Hlima
Faculty of Economics and Management of Sfax, University of Sfax,
Sfax, Tunisia, and
Anis Jarboui
High Institute of Business Administration of Sfax, Sfax, Tunisia
Abstract
Purpose – This study aims at providing a proof of the factors associated with sustainability assurance
demand by French companies.
Design/methodology/approach – This research used panel data methodology.
Findings – The study results demonstrate that institutional ownership and the presence of corporate social
responsibility (CSR) committee within the management board have an effect on the demand for sustainability
assurance. The results also reveal that three types of stakeholders (employees, environment and customers)
positively affect the demand of voluntary sustainability assurance.
Originality/value – The paper provides a preliminary proof on the effects of the governance of
corporation and pressure of some groups of stakeholders on the voluntary demand of sustainability assurance
in France.
Keywords Corporate governance, Stakeholders, France, Sustainability assurance
Paper type Research paper
1. Introduction
The sustainability report publication and its independent assurance have experienced a
remarkable development over the past few decades. In 2010, Junior et al. (2014) worked on
a sample of 500 companies and reported that 85 per cent of the firms in the sample publish a
sustainability report. In 2000, Rikhardsson et al. (2002) conducted a survey on the same
sample and found that only 47 per cent do so. The authors also report that, only in Australia,
100 per cent of sustainability reports have been assured by an independent third party and
more than 50 per cent in some countries such as Spain, The Netherlands, Italy, Brazil,
Britain, Sweden and Japan compared to only 39 per cent in France.
In France, corporate social responsibility (CSR) has a growing importance on the
company and its reputation. According to the Reputation Institute, a research firm
specialized in the measurement and management of companies and organizations, the
importance given by the French to the different dimensions of CSR represents a significant
percentage of the overall reputation of a company. The citizen engagement dimension is
considered the second most important dimension for the French after the products and
services offered by companies. Indeed, the sensitivity to the CSR commitment is growing. In Sustainability
2011, only 27 per cent of the consumers surveyed said they were willing to pay more for report
products and services from socially responsible companies. Two years later, this percentage
reached 31 per cent, according to the new Nielsen survey[1].
assurance
Sustainability assurance can be regarded as a disciplinary mechanism to lessen
agency conflicts between managers and shareholders, by underlying agency costs, as
the provided sustainability information is more reliable (Simnett et al., 2009). The
sustainability assurance like the financial audit contributes to the reduction of 321
information asymmetry by promoting transparency (Kolk and Perego, 2010; Sellami
and Ben Hlima, 2019) and, thus, increases the information reliability in the eyes of
shareholders. Furthermore, Carroll (1991) claims that there is a connection between the
idea of CSR and stakeholders of a company. Consequently, sustainability report
assurance can also be considered as an outcome of the different pressures from its
principal stakeholders. Hence, our aim was to analyze the effects of the internal
governance structures, bearers of requests from shareholders regarding transparency
and reliability of information, as well as those of the demands of the most important
stakeholders in an industry on the decision to assure sustainability reports. In
particular, we wonder if voluntary demand of sustainability assurance in France is
affected by internal governance structures and/or link between firms and their
stakeholders in an industry. In fact, prior research has proved that the demand for
sustainability assurance is generally high in countries where investor protection rights
are low (code law) as opposed to those with high investor protection rights (common
law) (Simnett et al., 2009; Herda et al., 2014). Even though, France is a code-law country
where the publication of sustainability reports is widespread, research on
sustainability assurance is still scarce (Déjean and Martinez, 2009). It could, therefore,
be interesting to examine these factors in such a country. In fact, France is among the
top tiers in an assessment of the quality of communications and process maturity with
many other European countries which have dealt with the issue of corporate
sustainability and reporting for more than ten years (KPMG, 2011). Previous literature
has mostly focused on the broad company characteristics (i.e. size, leverage, financial
performance, among others) (Sierra et al., 2013; Zorio et al., 2013; Branco et al., 2014; Cho
et al., 2014; De Beelde and Tuybens, 2015; Kuzey and Uyar, 2017) and institutional
factors (i.e. code-law/common-law country, enforcement mechanisms, among others)
(Simnett et al., 2009; Kolk and Perego, 2010; Herda et al., 2014; Martínez-Ferrero and
García-Sánchez, 2017) as the main factors leading to the demand of sustainability
assurance. The present study extends prior works by analyzing the effects of some
characteristics of corporate governance and pressure of specific stakeholders on
assurance of sustainability reports in France. Specifically, we examine the presence of a
CSR committee, institutional ownership, ownership concentration, as well as the
requirement of customers, environment and employees that are considered as the three
major sorts of stakeholders.
The results of our study show that institutional ownership, existence of CSR committee
and the power of some groups of stakeholders (employees, environment and customers)
positively affect the demand of voluntary sustainability assurance.
The remainder of this paper is organized as follows: a conceptual background of
sustainability assurance and the explanatory theoretical framework of this topic are
presented in Section 2. In Section 3, we develop the hypotheses to be tested in our study.
Section 4 explains the research methodology. The results are outlined and discussed in
Section 5. A brief conclusion is given in Section 6.
JFRA 2. Conceptual background and theories
17,2 The present work aimed at examining the factors that affect the adoption of assurance
statements in sustainability reports through the lens of the stakeholders and agency
theories. This section gives an overview on the benefit of voluntary sustainability report
assurance and outlines the theoretical framework used.

322 2.1 Sustainability assurance

As the issuance of sustainability reporting has grown (Fifka, 2012; KPMG, 2013; Talbot and
Boiral, 2018), transparency has become increasingly indispensable regarding the
information communicated in this kind of report. To ensure transparency and enhance
credibility of sustainability reports, firms increasingly demand independent sustainability
assurance (O’Dwyer, 2011; Cohen and Simnett, 2015; Channuntapipat, 2018), i.e. actions
intended to lead to published conclusions on the quality of the report and the data included
in it (GRI, 2006).With respect to the perception of different groups of stakeholders, some
researchers claim that only credible information is sufficiently considered (Healy and
Palepu, 2001). Assurance of sustainability information affects its credibility positively
(Moroney et al., 2012; Brown-Liburd and Zamora, 2015; Birkey et al., 2016). Such an
enhanced credibility would help to reduce cost of capital and improve analyst prediction
(Casey and Grenier, 2015). It can also result in a superior readiness to invest in a firm (Cheng
et al., 2015; Reimsbach et al., 2018). Pflugrath et al. (2011) report that independent assurance
influences the credibility of sustainability information in the eyes of the financial analyst.
Furthermore, when independently assured, positive CSR information is considered more
credible by non-professional investors (Coram et al., 2009). Moreover, assurance service can
decrease analysts’ prediction errors (Dhaliwal et al., 2012), as well as investors’ worries
about firms being absorbed by practices as social desirability (Barnea and Rubin, 2010;
Hummel et al., 2019) or greenwashing (Lyon and Maxwell, 2011). Furthermore, assurance
statements can be used by the management as a means for examining and enhancing in-
house management control systems. However, previous studies claim that existing
information systems have many shortcomings that may lead to reporting inexact data
(RhianonRhianon Edgley et al., 2010). Thus, an independent or external assurance enhances
information systems and integrates sustainability principles into the organization’s strategy
and decision-making. Corporate sustainability report assurance can boost the information’s
exactness and help determine the main risks facing the firm (Gray, 2002; Jones and Solomon,
2010). Furthermore, sustainability assurance should be considered as an in-house tool for the
company to deal with specific sustainability-related risks and issues and not as a way to
improve external openness (Owen et al., 2000; Fonseca, 2010; Bepari et al., 2016). Therefore,
sustainability reports and assurance are considered as ingredients of success in defining a
sustainability policy (Zorio et al., 2013), as well as organizational control mechanisms to
foster the strategic incorporation of sustainability into the firm (Ballou et al., 2011).

2.2 Theoretical framework

In spite of the broad academic and business interest in the assurance of sustainability
reports, a thorough theoretical framework of their fundamental determinants is still elusive.
Actually, empirical studies of CSR practices have relied on various theoretical frameworks
in favor of sustainability assurance, namely, the agency theory and the social and political
theory. In connection with the former, Jensen and Meckling (1976) state that the separation
between ownership and control, synonymous of conflict of interests between stockholders
and manager, leads to agency costs, which can be decreased by means of control structures
like external assurance. Chow (1982) shows that assurance demand arises from the need to
mitigate agency costs. Particularly, in the assurance of sustainability information setting, Sustainability
assurance statements may provide a tool to alleviate agency costs (Simnett et al., 2009) and report
also to prove to the shareholders that managers perform in the most advantageous way (Cho
et al., 2014). Sustainability reporting and assurance may act as tools for monitoring and
assurance
controlling agency problems between directors and stockholders (Ruhnke and Gabriel, 2013;
Wong and Millington, 2014). However, under the social and political theory group, three
overlapping perspectives can be distinguished: stakeholder theory, legitimacy theory and
political economy theory. 323
The political economy theory proposes that studies in the economic field cannot be
conducted without considering the social, political and institutional context (Gray et al.,
1995). According to this theory, companies facing greater social/political pressures are
known to pay more attention to CSR and, therefore, sustainability assurance is seen as a
function of social and/or political pressure (Sellami and Gafsi, 2019). Legitimacy is defined
by Suchman (1995) as “a generalized perception or assumption that the actions of an entity
are desirable, proper, or appropriate within some socially constructed system of norms,
values, beliefs and definitions”. This implies that, for firms to be legitimate, they should not
only play an economic role but should also adhere to values and norms of the society in
which they operate (Sellami and Gafsi, 2018). To gain and maintain support from the public,
a company should be able to act in a manner that is consistent with the expectations of the
society and necessarily to communicate that its activities are in accordance with social
values (Buhr, 1998). The stakeholder theory evaluates the presence of a link between
companies and diverse groups besides the shareholders. Freeman (2010) states that these
stakeholders can nearly always influence or be influenced by the actions of the company.
According to Freeman, customers, employees, environment, suppliers, shareholders,
community, etc. may be part of these stakeholder groups; therefore, firms must control their
relationships with them (Elijido-Ten et al., 2010). Some researchers used the stakeholder
theory to explain the social responsibility disclosure quantitatively and qualitatively and
found a correlation between the pressure of specific stakeholders and the CSR disclosure
(Roberts, 1992; Prado-Lorenzo et al., 2009; Lu and Abeysekera, 2014). Fernandez-Feijoo et al.
(2014) analyzed the effect of stakeholder pressure on transparency of sustainability reports.
They used a sample of 1,047 enterprises (from ten countries) which published sustainability
reports between 2008 and 2010. They concluded that the level of transparency of the CSR
reports depends on some stakeholders (customers, employees, environment and investors).
They thereby found that the impact of the stakeholder’s power is important regarding CSR
practices. The main difference between the aforementioned alternative theories lies in the
basic assumption. Unlike the agency theory, the stakeholder theory, theory of legitimacy
and theory of political economy adopt a systematic perspective while recognizing that firms
influence and are influenced by the society in which they operate. We hypothesize that these
theories, which are crucial in the studies of CSR practices, deal with the same issue from
different angles. For this reason, they should not be seen as opposing perspectives, but
rather as different ways of understanding and studying organizational choices to demand
sustainability assurance. Furthermore, the regulation of sustainability assurance is limited
and very recent (Gillet-Monjarret and Rivière-Giordano, 2017). In the recent years, the
French government has taken steps to put sustainable development at the heart of France’s
priorities, particularly with regard to sustainability reporting and assurance. The law on
New Economic Regulations (NER) of May 15, 2001 (Article 116), sets a regulatory
framework on societal information by requiring French-listed companies to disclose, in their
management report, information covering social and environmental consequences of their
activity. The requirements of this law have been extended by Ordinance No. 2004-1282 of
JFRA December 20, 2004 to unlisted French companies, which must therefore mention, where
17,2 applicable, non-financial key performance indicators (information relating to environment
and personnel). In 2007, the “Grenelle Environment” brought together the state and
representatives of civil society to define a roadmap for sustainable ecology, development
and planning. Title V of the Grenelle law 1 entitled “Governance, information and training”
includes an article on corporate societal reporting. Title V of the Grenelle law 1 entitled
324 “Governance, information and training” includes an article on societal reporting of French
companies (Grenelle Law 1 Title V Article 46). This article, which places the quality of
societal information as essential conditions for good corporate governance, reinforces the
requirements for societal reporting Grenelle Law 2 promulgated on July 12, 2010 (law n°
2010-788), known as the “National Environmental Commitment”, aims at declining and
applying the Grenelle Law 1. Article 225 of this law extends, under conditions, the obligation
set by the law on the NER of 2001, to companies whose balance sheet total exceeds a
threshold set by Decree No. 2012-557 of April 24, 2012. It introduced the notion of “assurance
of social and environmental information” for the first time.

3. Hypotheses development
Given the relatively scarce evidence, the first goal of our study was to extend prior literature
regarding factors which interfere in the decision to assure sustainability reports. As noted
above, prior research has mostly focused on the broad company characteristics and
institutional factors. However, this paper aims at providing evidence on whether the
governance mechanisms of a company and stakeholders’ pressure influence the firm’s
decision to assure a sustainability report. Insofar as these factors contribute to explaining
the behavior of companies in sustainability disclosure and the levels of CSR transparency,
we assume that they are also likely to influence assurance practices.

3.1 Corporate governance

Three factors of corporate governance were analyzed in this study: the ownership
concentration, institutional ownership and presence of a CSR committee within the
management board.
3.1.1 Ownership concentration. According to the agency theory, firms with a dispersed
capital have a greater number of shareholders who are not directly implicated in
management; therefore, the managers are motivated to adopt an opportunistic behavior to
expand their utility functions, possibly to the detriment of stockholders. However, when
only few large shareholders dominate the ownership structure of a company, they can
directly control managers, and hence, the establishment of a monitoring mechanism
becomes less important. Accordingly, the managers of companies with concentrated
capitals become less transparent and less motivated to implement CSR practices. The
findings of studies dealing with the effect of ownership concentration on the voluntary CSR
disclosure are mixed. Indeed, Naser et al. (2006) and Liu and Anbumozhi (2009) have not
been able to show a considerable rapport between the concentration of ownership and CSR
disclosure. In contrast, Rashid and Lodh (2009) and Lu and Abeysekera (2014) state a
significant and negative relation between ownership concentration and sustainability
reporting. Likewise, those firms show little interest in assuring sustainability information.
The more the capital is dispersed, the higher the shareholders’ expectations will be, as they
require more societal information and guarantees regarding the reliability of this type of
information. Here, we develop H1 as follows:
 H1. The probability of the demand for sustainability assurance is negatively correlated Sustainability
with ownership concentration. report
3.1.2 Institutional ownership. Based on the agency theory, institutional ownership can be assurance
considered as a factor of efficient control. In fact, institutional shareholders can control
managers to safeguard their interests (Shleifer and Vishny, 1986). These shareholders are
interested in all the parameters that can influence the overall performance of the company
(Cox et al., 2004). Hence, even if their main incentive remains economic, they are sensitive to 325
the societal impact of the companies in which they invest (Longstreth and Rosenbloom,
1973). Previous studies conclude that the institutional property is not a key aspect in
explaining the voluntary disclosure of sustainability information (Naser et al., 2006; Prado-
Lorenzo et al., 2009; Rashid and Lodh, 2009). However, a positive and significant correlation
between institutional ownership and the level of voluntary CSR disclosure was asserted
(Saleh et al., 2010; Oh et al., 2011). In the same vein, we assume that the presence of
institutional shareholders in the ownership and their pressure on the company and its
decision-makers influence the demand for sustainability assurance. We therefore develop
the following hypothesis:

H2. The probability of the demand for sustainability assurance is positively correlated
with the institutional ownership.
3.1.3 Corporate social responsibility committee. Given that the management board is an
essential in-house governance system (Adams et al., 2010; Cadbury, 1992), it may take
initiatives to manage corporate social and environmental responsibilities (Rodrigue et al.,
2013). Consequently, firms can implement CSR committees at the board level as an essential
component of their corporate governance practices to deal with social and environmental
problems. Also, when companies develop this kind of organism, they show their interest in
sustainability concerns and their tendency to be more transparent in this field (Peters and
Romi, 2014; Liao et al., 2015). Here, we hypothesize that:

H3. The probability of the demand for sustainability assurance is positively correlated
with the presence of a CSR committee.

3.2 Pressure of stakeholders

Some previous works showed that the industry is a determinant factor in setting up CSR
practices (Fry and Hock, 1976; Cowen et al., 1987; Gray, 2002; Prado-Lorenzo et al., 2009;
Reverte, 2009; Simnett et al., 2009; Zorio et al., 2013; Cho et al., 2014). Other studies reveal the
connection between the industry in which the company operates and the pressure of specific
stakeholders (Deegan and Gordon, 1996; Hackston and Milne, 1996; Adams et al., 1998). In a
recent study, Fernandez–Feijoo et al. (2014) used the stakeholder theory to show the link
between transparency level of the sustainability report and the belonging of the company to
a specific industry where stakeholders exert strong pressure. In accordance with them, we
can assume that the decision of managers to assure their sustainability information is the
outcome of the pressure from primary stakeholders in an industry. To examine the effect of
stakeholders’ pressure on the demand for assurance on sustainability reporting, we classify
industries, using the stakeholder theory, into three categories inspired from previous works
by Sweeney and Coughlan (2008), Branco and Rodrigues (2008) and Fernandez–Feijoo et al.
(2014). These three categories are namely: environmentally sensitive industries; “Consumer
proximity” industries and industries with high-employee pressure (Branco and Rodrigues,
2008; Fernandez-Feijoo et al., 2014).
JFRA 3.2.1 Customer proximity industries. Companies operating in industries very close to
17,2 consumers demonstrate more importantly their interest in social responsibility because of
the benefit they can gain from consumers in relation to their image (Cowen et al., 1987).
Huang and Kung (2010) state that consumers apply significant pressure on companies
concerning environmental disclosure. Fernandez–Feijoo et al. (2014) prove that companies
operating in a sector which is well-known to consumers improves the transparency level of
326 sustainability reports. Therefore, we assume that firms in industries with high consumer
closeness are under pressure from consumers and are more expected to assure sustainability
information so as to improve their image. Here, we develop the following hypothesis:

H4. The probability of the demand for sustainability assurance is positively correlated
with belonging to industries with high consumer proximity.
3.2.2 Environmentally sensitive industries. Firms operating in industry which have a high
environmental impact are more likely to be affected by greater pressures with respect to
sustainability concerns than companies operating in industries which have a little
environmental impact (Branco and Rodrigues, 2008). Previous research has shown that the
former present higher levels of transparency in their sustainability report (Araya, 2006;
Alali and Romero, 2012; Fernandez-Feijoo et al., 2014). Therefore, companies belonging to
environmentally sensitive industries will probably assure sustainability reports more than
companies in less environmentally sensitive industries. We, therefore, develop H5 as
follows:

H5. The probability of the demand for sustainability assurance is positively correlated
with belonging to environmentally sensitive industries.
3.2.3 Employee-oriented industries. Given the surge in sustainability awareness, employees
have begun to pay particular attention to credibility and transparency of CSR reports. They
realize that passive sustainability strategies may lead to report incredible CSR information,
which harms the reputation of the company, and possibly compromises the rights and
interests of the employees. As their rights and interests are closely linked to the prospects of
the company, employees are specifically interested in the company’s attitudes toward
sustainability strategies. Staff in large firms are usually more structured and their voices are
more likely to be taken into consideration at the level of management. Under the pressure of
employees, a company can actively implement sustainability strategies and assume its
social responsibilities (Huang and Kung, 2010). Therefore, the larger the staff, the more
influence they have on sustainability policies. Previous studies have shown that the
degree of transparency in terms of sustainability report is significantly influenced by the
pressure of employees (Huang and Kung, 2010; Fernandez-Feijoo et al., 2014). Employees
may require more credible sustainability information and, thus, they exert pressure on their
companies to assure this type of information to avoid undermining their rights and interests.
Therefore, we develop the following hypothesis:

H6. The probability of the demand for sustainability assurance is positively correlated
with membership in industries with high pressure from employees.

3.3 Control variables

We drew upon prior sustainability disclosure and assurance studies to identify other
variables that may influence sustainability assurance demand.
 3.3.1 Profitability. The discretionary sustainability assurance is costly for companies Sustainability
(Simnett et al., 2009; Kolk and Perego, 2010). Thus, only the most profitable companies can report
implement sustainability assurance because they are more likely to bear the cost. The
findings of studies dealing with the effect of profitability on sustainability assurance are
assurance
diverse. Some researchers found no noteworthy correlation between profitability and
sustainability assurance (Zorio et al., 2013; De Beelde and Tuybens, 2015; Casey and Grenier,
2015). However, some authors found that profitability positively affects the choice to assure
sustainability reports (Simnett et al., 2009; Sierra et al., 2013; Branco et al., 2014). Therefore, 327
in our study, we expect that the demand for sustainability assurance is positively correlated
with the firm’s profitability.
3.3.2 Degree of internationalization. A company that is strongly involved in an
international activity enters into relationships with wider counterparties than a company
operating at a national level. Hence, the pressure increases and interest groups multiply.
Companies with international operations are motivated to be more transparent to earn the
trust of their stakeholders (Belkaoui and Karpik, 1989; Lopes and Rodrigues, 2007). This
transparency can be ensured by the establishment of CSR practices such as sustainability
disclosure and assurance. Branco and Rodrigues (2008) assumed a positive correlation
between the degree of internationalization of the company and its disclosure of CSR
information but failed to empirically confirm it. Therefore, in our research, we expect the
demand for sustainability assurance to be positively correlated with the degree of
internationalization.
3.3.3 Leverage. According to the agency theory, leverage has been suggested as a
relevant factor to explain sustainability assurance demand in prior research (Zorio et al.,
2013; Branco et al., 2014; Casey and Grenier, 2015; De Beelde and Tuybens, 2015). Jensen and
Meckling (1976) suggest that agency conflicts between the principals (e.g. creditors) and
their agents (e.g. managers serving the interests of the stockholders) generate agency costs
which are likely to be higher for indebted companies. Hence, companies having elevated
leverage are likely to implement CSR practices, such as sustainability assurance, to mitigate
agency costs by restoring the debt holders’ confidence that their stakes are preserved.
Therefore, in our research, we suppose that the sustainability assurance demand is
positively correlated with the company’s leverage level.
3.3.4 Company’s age. Age is an indicator of the company’s ability to survive in a
turbulent and evolving environment and to maintain its reputation. To manage their repute,
older firms should adopt CSR practices. Some authors argue that the matureness of a
company can influence its social responsibility activities (Roberts, 1992; Moore, 2001; Godos-
Díez et al., 2011). According to Roberts (1992), as a company grows, its repute and
participation in social responsibility activities can become embedded, thus raising the
expectations of stakeholder about funding or corporate community implication and making
it difficult to withdraw. Therefore, in our research, we suppose that the demand for
sustainability assurance reporting is positively correlated with the company’s age.

4. Research methodology
4.1 Data and sample
Our original sample was composed of listed French companies belonging to the SBF250 and
CAC ALL TRADBLE indexes during the period 2010-2012. From this sample, we eliminated
the observations of companies whose annual and sustainability reports are not available (26
observations). In addition, we excluded foreign observations (28 observations) and
observations without the necessary data (91 observations). Thus, our final sample
comprised 807 observations (company-year) (Table I). The data sources of our research are
JFRA annual and sustainability reports collected from the websites of companies and Worldscope,
17,2 Dafsaliens and Diane databases. With the purpose of alleviating the potential effects of
outliers, we winsorize the continuous data (IO, EOI, Profit, DI, LEVERAGE and AGE) at the
1st and 99th percentile levels.
To identify the companies assuring sustainability reports voluntarily, we analyzed the
annual and sustainability reports of 807 observations (company-year). From this analysis,
328 we obtained the following results:

227 observations assured their sustainability information: a demand rate of 28.13
per cent; and

580 observations did not assure their sustainability information: a non-demand rate
of 71.87 per cent.

4.2 Variables
The dependent variable (ASSURANCE) is a dichotomous variable which equals 1 if the
company assures its sustainability report, and 0 otherwise (Kolk and Perego, 2010; Kuzey
and Uyar, 2017). To examine the influence of corporate governance and pressure of some
groups of stakeholders on the assurance of sustainability information, a set of independent
variables was used. The dummy variable, which equals 1 if a non-institutional shareholder
owns 20 per cent or more of the capital, and 0 otherwise, was used as a measure for
ownership concentration (OC) (MacIntosh and Schwartz, 1995; Jarboui and Olivero, 2008).
The proportion of capital held by institutional shareholders is a measure for institutional
ownership (IO) (Saleh et al., 2010; Sánchez et al., 2011). The variable CSR committee takes is
equal to 1 if a company has a board-level CSR committee, and 0 otherwise (Peters and Romi,
2014; Liao et al., 2015). The independent variable customer proximity industries (CPI) is a
dichotomous variable that is equal to 1 if the company is a member of one of the industries
that are well known by the general public as consumers of their goods or services, such as
energy utilities, financial services, food and beverage products, healthcare, household and
personal products, retailers, telecommunications, textiles and apparel, waste management
and water utilities (Branco and Rodrigues, 2008; Sweeney and Coughlan, 2008; Fernandez-
Feijoo et al., 2014). For the remainder of industries, the variable is equal to 0. The
environmentally sensitive industries (ESI) variable is also a dichotomous variable that
assumes the value of 1 if a company belongs to one of the industries that have an important
impact on the environment, namely, agriculture, automotive, aviation, chemical,
construction, construction materials, energy, energy utilities, forest and paper products,
logistics, metal products, mining, railroad, waste management and water utilities (Branco
and Rodrigues, 2008; Tagesson et al., 2009; Gamerschlag et al., 2011; Fernandez-Feijoo
et al.,2014). For the remainder of industries, the variable is equal to 0. We define the

Firms

Total firm-year observations of indices SBF 250 and CAC all Tradable 2010-2012 952
Less
Firm-year observations without annual and sustainability reports available 26
Table I. Foreign firm-year observations 28
Sample selection Firm-year observations without the necessary data 91
2010-2012 Total firm-year observations available 807
employee-oriented industries (EOI) variable by means of the firm’s size (measured by the Sustainability
number of employees) acting as a substitute for pressure from staff (Huang and Kung, 2010; report
Fernandez-Feijoo et al., 2014). Huang and Kung (2010) estimated that firms with a larger
assurance
number of employees generally have more structured employees who can exert a pressure
regarding environmental disclosure; thus, their ideas are more likely to be treated at a
managerial level. They assert that the larger the staff, the more powerful their influence on
the transparency level. This observation is in agreement with that of Fernandez–Feijoo et al. 329
(2014). As a control variable, profitability of the company (Profit) is measured by the return
on assets (Sierra et al., 2013; Branco et al., 2014; Kuzey and Uyar, 2017). We measured the
degree of internationalization (DI) by the proportion of foreign sales divided by the total
sales (Robb and Zarzeski, 2001; Bansal, 2005; Branco and Rodrigues, 2008). The ratio of total
debt to total assets was used to assess the leverage level (LEVERAGE) (Sierra et al., 2013;
Zorio et al., 2013; Branco et al., 2014; Sellami and Slimi, 2016; Kuzey and Uyar, 2017).
Company’s age (AGE) is determined using the number of years since the foundation of the
company (Godos-Díez et al., 2011; Sellami and Tahari, 2017).

5. Empirical results
In this section, we present our descriptive statistics and, then, the results of the regression
analysis.

5.1 Descriptive statistics

The descriptions of all the variables used in our study are presented in Table II, whereas
Table III summarizes the descriptive statistics of the independent variables of our model. As
can be seen in Table III, IO represents on average about 20 per cent. The number of
employees for the companies of our sample ranges from 1 to 464,148, with a mean

Variables Definition

ASSURANCE 1 if a firms assures its sustainability report, and 0 otherwise

OC 1 if a non-institutional shareholder owns 20 per cent or more of the capital, and 0
otherwise
IO the percentage of shares owned by institutional shareholders
CSRcommittee 1 a company has a board-level CSR committee, and 0 otherwise
CPI 1if the firm belongs to one of the following industries: energy utilities, financial
services, food and beverage products, healthcare, household and personal products,
retailers, telecommunications, textiles and apparel, waste management and water
utilities, and 0 otherwise
ESI 1 if the firm belongs to one of the following industries: agriculture, automotive,
aviation, chemical, construction, construction materials, energy, energy utilities,
forest and paper products, logistics, metal products, mining, railroad, waste
management and water utilities and water utilities, and 0 otherwise
EOI number of employees
Profit return on assets
DI ratio foreign sales divided by total sales
LEVERAGE total debt/total assets
AGE the number of years since the date of foundation of the company
DUALITY 1 when there is CEO duality, i.e. the CEO also holds the position of the chairman of
the board, and 0 otherwise
BOARDMEET the number of board meetings per year Table II.
BOARDSIZE the number of directors serving on the board Variable descriptions
JFRA Continuous variables N Mean Min. Max. SD
17,2
IO 807 0.1969 0 0 0.9775 0.2485
EOI 807 23,416.49 1 464,148 52,836.18
Profit 807 0.0212 0.6719 0.9227 0.1035
DI 807 0.1475 0 1 0.2643
LEVERAGE 807 0.2223 0 2.2618 0.1934
330 AGE 807 32.190 1 104 17.822

Binary variables N Frequencies (%)

0 1 0 1
OC 807 95 712 11.772 88.228
CSRcommittee 807 701 106 86.864 13.136
Table III. CPI 807 694 113 85.998 14.002
Descriptive statistics ESI 807 704 103 87 0.237 12.763

of 23,416.49. The average profitability of the companies, which is determined using the ratio
of net income on total assets, stands at 2.12 per cent with profitability dispersion between –
67.19 and 92.27 per cent. The average leverage level ratio of the sampled companies is 22.23
per cent. Only around 15 per cent of our sample companies have geographically dispersed
activities. The average age of our sample firms is more than 32 years. Over 88 per cent of the
sample companies have a concentrated ownership. About 13.136 per cent of the companies
have a CSR committee; 14.002 per cent of companies belong to industries well-known by
consumers. Companies belonging to environmentally sensitive industries represent 12.763
per cent.

5.2 Regression results

In what follows, we will describe our research model and verify the non-existence of
multicollinearity. Lastly, we outline our main findings.
5.2.1 Research model. Our dependent variable is binary; hence, it equals 1 if an assurance
statement is included in the sustainability reporting, and 0 otherwise. The use of logistic
regression model is, therefore, suitable for our analysis. The logistic analysis is neither
dependent on the normal distribution of error terms nor by homoscedasticity. No linearity
between dependent and independent variables is required.
The following logistic regression model was tested in our work:

P ð ASSURANCE Þit ¼ b 0 þ b 1 OCit þ b 2 IOit þ b 3 CSRcommitteeit þ b 4 CPIit þ b 5 ESIit

þ b 6 EOIit þ b 7 Profitit þ b 8 DIi þ b 9 LEVERAGEit þ b 10 AGEit
þ « it

The variables are described in Table II.

To apply the logistic regression, there must be no multicollinearity between the
explanatory variables. To identify the possible problems of multicollinearity among the nine
explanatory variables, we set up a correlation matrix. Furthermore, we computed the
variance inflation factor (VIF), which as well examines the existence of collinearity between
the independent variables. As can be seen from Table IV, all the correlation coefficients are
 OC IO CSRcommittee CPI ESI EOI DI Profit LEVERAGE AGE VIF

OC 1.0000 1.21
IO –0.3620*** 1.0000 1.19
CSRcommittee –0.1484*** 0.1049*** 1.0000 1.22
CPI 0.0090 0.0480 0.1943*** 1.0000 1.10
ESI –0.1138** 0.0598* 0.2432 *** 0.1154*** 1.0000 1.13
EOI –0.1641** 0.1889*** 0.3639*** 0.2555*** 0.2474*** 1.0000 1.38
DI 0.0151 –0.0138 –0.0378 –0.0674* 0.0566 –0.0691** 1.0000 1.03
Profit –0.1218*** 0.0017 0.0037 –0.0077 –0.0328 –0.0160 0.0061 1.0000 1.07
LEVERAGE 0.1814* 0.1195*** 0.1263*** 0.0600* 0.0856** 0.1321*** –0.1348*** –0.2025*** 1.0000 1.11
AGE –0.0706 0.1355*** 0.1228*** 0.1655*** 0.1931*** 0.3432*** –0.0535 0.0448 0.1442*** 1.000 1.18

Note: Significant at:*1, **5 and ***10 per cent levels, respectively

Table IV.
Matrix correlation
331
assurance
report
Sustainability
JFRA below 0.8, i.e. the limit at which serious problems of multicollinearity start (Lewis-Beck,
17,2 1991; Gujarati, 2009). Regarding the VIF, this table shows that the highest VIF is equal to
1.38 which is below the limit at which serious problems of multicollinearity start (i.e. 10,
according to Myers (1990)). Therefore, we can infer that there are no multicollinearity
problems.
5.2.2 Results. Our regression results are given in Table V.
332 As can be seen from Table V, the model is globally important because the Wald
chi-square is significant at the level of 1 per cent. With regard to its estimation result, we
find that OC is not significant. This contrasts with Rashid and Lodh (2009) and Lu and
Abeysekera (2014) who find that OC negatively influences sustainability disclosure.
Therefore, H1 is not supported.
Our results indicate that the percentage of IO is significant at the level of 5 per cent.
Hence, H2 is supported. This is contrasts with Naser et al. (2006), Prado-Lorenzo et al. (2009)
and Rashid and Lodh (2009) who find that IO does not influence the voluntary disclosure of
sustainability information. However, our findings are consistent with the agency theory and
the results of Saleh et al. (2010) and Oh et al. (2011) who show that institutional shareholders
has a positive correlation with the level of voluntary CSR disclosure. In fact, institutional
shareholders increasingly demand sustainability information and incite companies to build
credibility and transparency of such information. By forcing companies to require this type
of audit, these institutional shareholders protect their interests. Improving the credibility
and reliability of societal information is, therefore, a major concern of the institutional
shareholder.
In addition to OC and institutional shareholders, the findings demonstrate that the
estimated CSR committee coefficient (CSR committee) is positive and very significant at the
level of 1 per cent. Hence, H3 is supported. This contrasts with Rodrigue et al. (2013) who
find that environmental committee does not influence environmental performance.
Nevertheless, our results are in agreement with the agency theory and previous studies

Regression Z-value
Independent variables Signs predicted coefficient (p-value)

Constant 212.087*** –6.89 (0.000)

Corporate governance
OC – –1.045 –1.55 (0.121)
IO þ 2.374** 2.26 (0.024)
CSRcommittee þ 5.703*** 6.03 (0.000)
Stakeholders’ pressure
CPI þ 1.214* 1.90 (0.057)
ESI þ 1.540** 2. 81 (0.015)
EOI þ 1.057*** 6 ,87 (0.000)
Control variables
Profit þ –3.025 –0.60 (0.549)
DI þ –1.813 –1.62 (0.106)
LEVERAGE þ 1.099 0.68 (0.494)
AGE þ 0.029** 1.98 (0.047)
Table V.
Multivariate Notes: Wald chi-square 63.87, (p-value) (0.000), number of observations 807. *Significant at the 10% level,
regression **significant at the 5% level, ***significant at the 1% level. Please find variable definition in Table II
(Michelon and Parbonetti, 2012; Liao et al., 2015) which show that the presence of CSR/ Sustainability
environmental committee influences the decisions to disclose sustainability information. report
Indeed, the presence of a CSR committee in the management board may influence the extent
of the supervision of sustainability concerns, including sustainability assurance.
assurance
The CPI variable was proved to influence sustainability assurance demand as the
estimated coefficient is significant at the level of 10 per cent. Hence, H4 is supported. This is
in line with the stakeholders theory and a study by Fernandez–Feijoo et al. (2014) who
confirm that the pressure of customers enhances the level of transparency of sustainability 333
reporting. As there is a reported demand on CSR, firms in industries with high consumer
closeness are likely to enhance the repute of their products or services by adopting
sustainability assurance.
Regarding ESI, the results reveal that this variable is positively and significantly
correlated with sustainability assurance at the level of 5 per cent. Hence, H5 is supported
corroborating the stakeholders theory and previous works (Araya, 2006; Alali and Romero,
2012; Fernandez-Feijoo et al., 2014). In fact, the demands for sustainability assurance may
derive from the interest in reducing the public awareness of the larger effect of the industry
on the environment.
Likewise, our results show that the estimated coefficient of EOI is positive and very
significant at the level of 1 per cent. Hence, H6 is supported, confirming the stakeholders
theory and a previous research by Fernandez–Feijoo et al. (2014), which states that the larger
the staff, the more pressure they exert on companies to assure credible sustainability
information.
Regarding the control variables, we find a significant positive correlation between the
company’s age (AGE) and sustainability assurance demand. This is consistent with the
result of Roberts (1992), Moore (2001) and Godos–Díez et al. (2011) who show a positive
association between the company’s age and CSR practices. Indeed, mature companies get
used to being more transparent and, consequently, the implementation of CSR practices
increases over time. Therefore, older firms could have improved the credibility of their
sustainability reporting practices over time and will probably be more involved in assuring
CSR reports than new ones. Table V shows that profitability (Profit), DI and level of leverage
(LEVERAGE) are not significant.
In conclusion, the IO, the existence of a CSR committee, the membership in ESI (pressure
of environment), the membership in industries with high consumer proximity (pressure
from the customers), the membership in industries with high employee pressure (pressure of
employees) and the company’s age are important factors in assuring sustainability reports
in France.
5.2.3 Supplemental analysis. To verify the robustness of our model, we carried out an
additional analysis by integrating other control variables in the tested model. In fact, we
controlled the effect of the combination of the functions of CEO and Chairman of the Board
of Directors. CEO duality (DUALITY) is a dichotomous variable that takes “1” when there is
CEO duality, i.e. the CEO also holds the position of the chairman of the board, and “0”
otherwise (Said et al., 2009; Muttakin and Subramaniam, 2015). Some previous research
indicates that board control is most effective when there is separation of CEO and chairman
positions (Jensen, 1993; Mak and Li, 2001; Farber, 2005). With respect to sustainable
development issues, the combined roles of CEO and chairman adversely affect the level of
CSR disclosure (Haniffa and Cooke, 2005; Muttakin and Subramaniam, 2015). We assume a
negative relationship between DUALITY and ASSURANCE.
We also included the board activity (BOARDMEET) and board size (BOARDSIZE)
variables using, respectively, the number of board meetings per year (Laksmana, 2008;
JFRA Liao et al., 2015) and the number of directors serving on the board (Lim et al., 2007; Liao et al.,
17,2 2015; Sellami and Fendri, 2017). Previous literature mostly states that bigger and more
active boards have greater impact and dedication to the company (Kalbers and Fogarty,
1993; DeZoort et al., 2002). Therefore, we assume a positive relationship between
sustainability assurance demand and both the level of activity and size of the management
board.
334 The results found are shown in Table VI below.
As can be seen from this table, the new model tested is still broadly significant, as the
Wald chi-square test is significant at 1 per cent level. The untabulated correlation matrix
indicates the absence of any multicollinearity problems. We also found that the results of
our research are noticeably the same. For the explanatory variables, the presence of a CSR
committee (CSRcommittee), the membership in industries with high consumer proximity
(customers pressure) (CPI), the membership in ESI (environment pressure), and the
membership in industries with high employee pressure (employees pressure) (EOI), the
coefficients are all positive and significant at the levels of 1, 5 and 10 per cent and, therefore,
H3, H4, H5, and H6 are also accepted in this extensive analysis. Moreover, concerning the
new control variables, the probability of the demand for sustainability assurance by French
companies is positively related to the size and activity of the board of directors. Indeed,
according to Table VI, the coefficients are positive, i.e. 0.225 and 0.166, respectively, for the
size of the board of directors (BOARDSIZE) variable and the activity of the board of
directors (BOARDMEET) variable. This is in line with the agency theory but is in contrast
to Liao et al. (2015) in the UK context who show that the board’s activity level does not
influence CSR disclosure. In fact, the active board of directors is more likely to have a
positive influence on the extent of control over societal issues, notably through the demand
for a sustainability assurance to give greater confidence to published sustainability
information and, thus, to preserve its reputation. In addition, this is in agreement with the

Independent variables Signs predicted Regression coefficient Z-value (p-value)

Constant –12.766 *** –7.34 (0.000)

Corporate governance
OC – –0.680 –1.12 (0.264)
IO þ 1.056 1.25 (0.211)
CSRcommittee þ 4.850*** 5.83 (0.000)
Stakeholders’ pressure
CPI þ 1.173* 1.89 (0.058)
ESI þ 1.406 ** 2.37 (0.018)
EOI þ 1.854 *** 5.92 (0.000)
Control variables
Profit þ –0.911 –0.42 (0.677)
DI þ –0.995 –1.17 (0.240)
LEVERAGE þ 0.476 0.53 (0.599)
AGE þ 0.0148 1.14 (0.255)
Table VI. DUALITY – 0.126 0.54 (0.593)
BOARDSIZE þ 0.225*** 3.98 (0.000)
Multivariate
BOARDMEET þ 0.166 *** 2.63 (0.009)
regression
(supplemental Notes: Wald chi-square 69.93, (p-value) (0.000), number of observations 807; *significant at the 10% level,
analysis) **significant at the 5% level, ***significant at the 1% level. Please find variable definition in Table II
agency theory and the result of Liao et al. (2015) who show that board size has a positive Sustainability
correlation with the level of CSR disclosure. However, our findings are in contrast with Said report
et al. (2009) in the Malaysian context who find that board size does not influence CSR
disclosure level. Indeed, a large board size creates a pool of resources, skills and experiences
assurance
that lead to more effective decisions. In particular, the large boards of directors have more
experience in the sustainability field, which makes it possible to motivate the company to
adopt sustainability assurance.
Table VI shows that the variable CEO duality (DUALITY) is not significant. 335

6. Conclusion
The present work provides original evidence of the extent to which power of stakeholders
and corporate governance mechanisms influence sustainability assurance demand. Our
analysis focused on a final sample of 807 observations (firm-year) belonging to the SBF 250
and CAC All-Tradable indexes over 2010-2012.
Our results indicate that ownership concentration has no significant effect on
sustainability assurance. We found that French companies having a high institutional
participation and a CSR committee are more likely to assure their CSR reports. Regarding
stakeholders’ pressure, our findings show that there is a positive and significant correlation
between the membership in ESI (pressure of environment), the belonging to industries very
close to consumers (pressure from customers) and the membership in industries employing
many employees (pressure of staff) and sustainability assurance. Indeed, our findings prove
that environment, employees and consumers have an influence on the voluntary assurance
demand.
Our results put forward the significance of corporate governance mechanisms and power
of stakeholders in an industry as drivers for the demand for sustainability assurance.
In short, we prove the positive correlation between the demand for voluntary
sustainability assurance and corporate governance structures, on the one hand, and
pressure of three groups of stakeholders, on the other hand, so that assurance of
sustainability information can act as a complementary tool to overcome agency problems
and to meet the requirements of groups of stakeholders. Our findings are useful for
standardization bodies, namely, the International Federation of Accountants (IFAC) and the
International Auditing and Assurance Standards Board (IAASB), to bring forward
reflections on the improvement of the standards governing the practice of sustainability
assurance such as ISAE3000 or AA1000AS. In addition, these results may be a response to
international investors, financial analysts, standard setters and auditors as to the type of
factors involved in the adoption of this kind of external assurance.
Sustainability assurance is a comparatively recent research area (KPMG, 2015); thus, this
paper can be considered as an important contribution to the sustainability accounting
literature. In addition, this work makes it possible to identify the characteristics that
differentiate the French environment from other environments with regard to the choice to
implement an assurance system for sustainability reports. It also contributes to the
understanding of the dynamics and process of adopting sustainability assurance in
environments with economic, cultural and professional characteristics different from those
of the Anglo-Saxon countries. Finally, our findings contribute to the agency and stakeholder
theories by identifying, respectively, corporate governance factors and stakeholders’
pressure and clarifying how they influence firms in their choice to voluntarily assure
sustainability reports. In this respect, while extensive research has investigated the broad
company characteristics and institutional factors for the assurance demand (Simnett et al.,
2009; Kolk and Perego, 2010; Sierra et al., 2013; Zorio et al., 2013; Branco et al., 2014;
JFRA Herda et al., 2014; Martínez-Ferrero and García-Sánchez, 2017), we contribute to the
17,2 literature by studying corporate governance factors and stakeholders’ pressure.
However, our paper has some limitations. Indeed, our sample is relatively small;
therefore, it would be interesting to extend it to cover all the listed French companies and
study the unlisted ones. Although the binary variable (no/yes) is the common measurement
of sustainability assurance in management and accounting research (Simnett et al., 2009;
336 Kolk and Perego, 2010; Sierra et al., 2013; Zorio et al., 2013; Branco et al., 2014; Cho et al.,
2014; Herda et al., 2014; De Beelde and Tuybens, 2015; Kuzey and Uyar, 2017; Martínez-
Ferrero and García-Sánchez, 2017), it can be considered as another limitation of this work. In
that respect, we only tested whether the governance of corporation and pressure of some
groups of stakeholders can affect the sustainability assurance demand, without paying
attention to other facets, namely, the quality of assurance or the assurance level. Taking on
an assurance process, which is a multidimensional construct influenced by numerous
dimensions or aspects, does not suggest a high level of quality (Francis, 2011). In a future
research, we will try to propose a quality proxy for sustainability assurance and to develop
the conclusions drawn from this work to study assurance quality. Furthermore, the
corporate governance factors identified in this study are only the concentration of
ownership, IO, presence of a CSR committee, CEO duality, board activity and board size;
therefore, examining other factors would be very interesting. In a future research, we will
investigate the relationship between sustainability assurance demand and a number of other
governance factors. Furthermore, a deeper analysis of the role of stakeholders can be carried
out in a further research.

Note
1. www.lesechos.fr/30/08/2013/lesechos.fr/0202976546654_les-francais-plus-sensibles-a-l-engagement-
societal-des-entreprises.htm

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Further reading
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Policy, Vol. 10 No. 4, pp. 297-308.

Corresponding author
Yosra Mnif Sellami can be contacted at: yosra.mnif.sellami.isaas@gmail.com

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