Voluntary sustainability assurance, capital constraint and cost of debt: International evidence

We examine whether a firm's voluntary purchase of sustainability assurance is associated with reduced capital constraint and lower cost of debt. We also explore the effect of assurance provider (accountant/non-accountant) and a country's level of investor protection/creditor rights, on this association. Using a panel dataset drawn from an international sample, we find that voluntary purchase of sustainability assurance is negatively associated with both capital constraint and cost of debt. The associations are stronger for accounting firm providers than non-accounting assurers. Further, the effect is stronger for firms operating in low investor protection (creditor rights) settings suggesting that voluntary sustainability assurance is valued in a context generally characterized by greater information asymmetry. Findings provide evidence that firms derive a financing benefit from voluntary sustainability assurance, and the benefit is sensitive to the profile of the sustainability assurance provider and the institutional environment in which the firm operates.