Foreign versus domestic institutional investors: How they differ when it comes to sustainability assurance

We investigate the association between domestic versus foreign institutional investors’ ownership and companies’ decision to enhance the reliability of their sustainability report through external assurance, and their choice of assurance provider. Using an international sample of 1,927 firms, we find evidence of the importance of distinguishing between foreign and domestic investors, when examining sustainability reporting assurance practices, during the 2010-2017 period. Results indicate that foreign investors’ ownership levels are associated with the choice of internationally recognized assurance providers (i.e., Big-4 firms), while domestic investors’ holdings are negatively associated with the assurance decision overall, and positively associated with other types of assurers. Additionally, we study foreign investors from stakeholder-oriented countries and
find that their holdings are positively associated with the decision to assure sustainability reports and choose a Big-4. Finally, results reveal that holdings from responsible foreign investors are positively associated with the assurance decision and the choice of a Big-4.