Is voluntary external assurance relevant for the valuation of environmental reporting by firms in environmentally sensitive industries?

Purpose This paper aims to investigate whether providing voluntary external assurance on voluntary environmental information by firms operating in environmentally sensitive industries (ESI) is relevant in terms of market value. It also examines how various characteristics of assurance statements (i.e. level of assurance, scope of assurance and provider of assurance) affect the value-relevance of environmental disclosure by ESI firms. Design/methodology/approach To mitigate the endogeneity problem, the authors use the two-step generalized method of moments estimation approach. Findings Focusing on annual and social reports of French companies listed in the SBF120 index, results show that environmental disclosure by ESI firms and its assurance are destructive in terms of market value. Moreover, while providing a broader scope of assurance and having a professional accountant as the assurance provider enhance the value relevance of environmental reporting of the whole sample, this is unlikely to be the case for ESI firms. In particular, a higher level of environmental disclosure is financially rewarded by market participants for ESI firms that provide a higher level of assurance. Originality/value The study extends the prior literature on the capital market benefits of voluntary assurance practices by focusing on the French legal environment. France can be considered as a new institutional context that has been little addressed by the existing literature.