The purpose of this study is to investigate if audited financial statements add value for firms in the private debt market. Using an instrumental variable method, we find that firms with audited financial statements, on average, save 0.47 percentage points on the cost of debt compared to firms with unaudited financial statements. We also find that using the big, well-known auditing firms does not yield any additional cost of debt benefits. Lastly, we investigate if there are industries where alternative sources of information make auditing less valuable in reducing the cost of debt. Here we find that auditing is less important in lowering cost in one industry, agriculture, where one lender has a 74% market share and a 100-year history of lending to firms within that industry. As such, it seems that lenders having high exposure to a certain industry might act as an alternative to auditing in reducing the information asymmetry between the firm and the lender.

There is extant research on theorization, conceptualization, determinants, and consequences of corporate social responsibility (CSR). However, what firms include in their CSR or sustainability reports are much less covered and are predominantly covered in case studies of individual firms. In this paper, we instead take a holistic view and simultaneously explore what firms around the globe currently disclose in these reports, more specifically we investigate if firms are shareholder or stakeholder focused. In this investigation, we check the alignment of the reports to the materiality framework of Sustainability Accounting Standards Board (SASB) which was developed having shareholders as the intended user. To estimate what firms disclose in CSR reports we used the unsupervised Bayesian machine learning approach latent Dirichlet allocation (LDA) developed by Blei et al. We conclude that firms target shareholders as the intended users of these reports, even in environments where stakeholder approach of management is argued to be more dominant. Methodologically, we contribute by demonstrating that topic modeling can enhance the objectivity in reviewing CSR-reports.

The paper contributes to the debate if voluntary nonfinancial disclosures, such as greenhouse gas disclosures in corporate social responsibility reporting, exhibit accountability or are merely greenwashing. If firms exhibit accountability, does their actions translate into observable impacts, e.g., as country-level real changes in GHG emissions? How do contextual factors affect accountable disclosures in CSR reporting? To answer these questions, we develop a novel measure to classify accountable information of GHG disclosures in CSR reporting. We operationalize the measure using natural language processing tools, such as collocation analysis, regular expressions, and text mining. Statistical models were used to carry out aggregate analysis to detect real effects in GHG emissions reductions and firm-level analysis to investigate how institutional factors affect accountable GHG disclosures. We find that firms headquartered or reporting in a civil-law legal-environment disclose significantly higher accountable information compared to those in a common-law legal-environment. However, there is a negative trend in accountability worldwide, and firm-level accountability in GHG disclosures is not detectable in a country-level reduction of GHG emissions. The results are robust for various alternative model specifications, and operationalization of the developed measure achieved high concordance when investigated on random samples manually. Compared to most past studies, we work with a significantly larger sample of 4459 reports across 82 countries, thereby dealing with greater complexity and leading to better generalizability. In addition, developing an approach that is many folds scalable and makes replicability straightforward. This is also one of the few studies to move beyond the usual “bag-of-words” approach in classifying voluminous corporate disclosure using NLP techniques.

The purpose of this paper is to provide insights on the views of firms regarding corporate sustainability (CS) and how the structure of the board affects this. We surveyed the CEOs, CFOs, and Environment Officers of about 850 Swedish firms (response rate 21%) affected by mandatory sustainability reporting after the implementation of the EU Directive 2014/95/EU. The six-transcending ambition levels (namely: pre-CS, compliance-driven, profit-driven, caring, synergistic, and holistic) of corporate sustainability proposed by van Marrewijk & Werre (2003) were used to classify the views of key officers on the sustainability agenda of their respective firms. We find that the drive by firms for higher CS ambition levels is positively influenced by a diverse board (i.e., representation of female board members), and the effect is more pronounced if the board is constituted with a female top executive. Moreover, younger top executives are more likely to have a higher CS ambition level. On the other hand, external CEOs, external board members, and forceful disclosure of sustainability activity (e.g., EU Directive 2014/95/EU) do not significantly influence CS ambition levels, whereas firm size and industry affiliation do. Our findings are useful for top managers and regulators interested in corporate governance issues and influencing the sustainability efforts of their firms. Methodologically, the use of a survey method is an extension to an otherwise high reliance on archival research in the field of CS. Furthermore, the dataset is unique, and the results are robust to various sensitivity analyses.