In line with the eighth sustainable development goal, Decent Work and Economic Growth, companies should contribute and implement activities that prioritize sustainability. The Indonesian government has also regulated the management of social and environmental responsibility in terms of limiting corporate responsibility set forth in Law No. 40 of 2007 article 74. Meanwhile, in Malaysia, concerns about the environment have also been voiced by the government, and companies are encouraged to provide information about the impact of their economic activities on the environment in their annual reports.
When companies express the assurance of external parties in the form of sustainability reports, they hope to provide clear definitions to investors, and avoid misunderstandings and errors in evaluating their performance.
According to previous research, a company’s positive sustainability report can improve a company’s reputation. The company is willing to show sustainability activities to get an assessment and attract outside attention. Investors will use the information into consideration whether they will invest in the company. Furthermore, the current condition of a company can be measured through the value of the company, which can also represent the collective judgment of investors. With the company’s growth in value, it can act as a positive indicator for investors and help them to make investment decisions.
According to Sisaye, sustainability report disclosure is an optional right for the company. Issues of subjectivity can also arise due to the complexity of calculating sustainability reports. Therefore, to audit this matter, a third party’s assurance is needed. The purpose of assurance from external parties is to improve the quality of information, which will be the basis for decision making among stakeholders and improve credibility. Therefore, companies that report assurance from external parties on the company’s sustainability report can be a signal for investors to provide an assessment of the company.
This study used 84 listed company from 2010-2016 as samples, by eliminating companies engaged in the financial industry. Company data in Indonesia is obtained through IDX, while Malaysian companies are obtained through Bursa Malaysia. Furthermore, the analysis technique used in this study is Ordinary Least Square Regression.
The results showed significant and positive correlation between the impact of assurance of external parties on the sustainability report to the value of company measured using Tobin’s Q. Furthermore, this study found that companies in Indonesia have higher disclosure in terms of assurance of external parties on sustainability reports compared to companies in Malaysia.
Author: Iman Harymawan, Ph.D. Detailed of this research available at: http://jssidoi.org/esc/home
Harymawan, I., Nasih, M., Salsabilla, A., & Putra, F. K. F. (2020). External Assurance on Sustainbility Report Disclosure and Firm Value : Evidence from Indonesia and Malaysia. Entrepreneurship Sustainability Issues, 7(3), 1500-1512. DOI: 10.9770/jesi.2020.7.3(5)
