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The influence of firm performance and (level of) assurance on the believability of management's environmental report

The influence of firm performance and (level of) assurance on the believability of management's... PurposeThis study empirically examines perceptions of environmental report believability based on a firm's relative performance and level of assurance obtained on environmental activities under the recently clarified and recodified attestation standards in the United States.Design/methodology/approachThe paper uses a 2 × 3 between-subjects experiment to identify differences in 153 non-expert environmental report users' perceptions of report believability based on positive or negative firm performance and (level of) assurance provided by an accounting firm.FindingsResults show a main effect in that negative performance reports are perceived to be more believable than positive performance reports, as driven by negative performance reports being significantly more believable when no assurance is present. The firm performance effect is eliminated once limited or reasonable assurance is provided. Further, positive performance reports with limited, but not reasonable, assurance are perceived to be more believable than reports without assurance. No differences are identified within the negative performance condition.Practical implicationsLimited assurance might be used as an impression management tool to enhance the believability of positive performance environmental reports. Users, practitioners, and standard-setters should also be aware that users might believe environmental reports are assured, even when no such assurance has been provided.Originality/valueThis paper examines the impact of assured environmental reporting on users that review firms' environmental reports outside of a shareholder/investor role. The study also demonstrates conditions in which firm performance and assurance impact perceptions of report believability. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Accounting, Auditing & Accountability Journal Emerald Publishing

The influence of firm performance and (level of) assurance on the believability of management's environmental report

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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
0951-3574
DOI
10.1108/AAAJ-11-2018-3726
Publisher site
See Article on Publisher Site

Abstract

PurposeThis study empirically examines perceptions of environmental report believability based on a firm's relative performance and level of assurance obtained on environmental activities under the recently clarified and recodified attestation standards in the United States.Design/methodology/approachThe paper uses a 2 × 3 between-subjects experiment to identify differences in 153 non-expert environmental report users' perceptions of report believability based on positive or negative firm performance and (level of) assurance provided by an accounting firm.FindingsResults show a main effect in that negative performance reports are perceived to be more believable than positive performance reports, as driven by negative performance reports being significantly more believable when no assurance is present. The firm performance effect is eliminated once limited or reasonable assurance is provided. Further, positive performance reports with limited, but not reasonable, assurance are perceived to be more believable than reports without assurance. No differences are identified within the negative performance condition.Practical implicationsLimited assurance might be used as an impression management tool to enhance the believability of positive performance environmental reports. Users, practitioners, and standard-setters should also be aware that users might believe environmental reports are assured, even when no such assurance has been provided.Originality/valueThis paper examines the impact of assured environmental reporting on users that review firms' environmental reports outside of a shareholder/investor role. The study also demonstrates conditions in which firm performance and assurance impact perceptions of report believability.

Journal

Accounting, Auditing & Accountability JournalEmerald Publishing

Published: Feb 28, 2020

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