Abstract

This study aims to provide useful information that can be used as a reference when establishing a domestic third－party verification system for sustainability disclosures to increase the reliability of sustainability disclosures, and empirically analyzes the impact on the cost of equity capital related to sustainability reports. The results of the analysis of the impact of the application of five third－party certification (verification) criteria on the cost of capital show that the application of the ‘AA1000APS’ and ‘VeriSustainTM1’ certification criteria has a high negative correlation. This suggests that the cost of equity capital will decrease when a non－financial information report (sustainability report) that applies the relevant certification criteria is published. The results of this study suggest that a certification level of reasonable assurance, not limited assurance, is required to increase the effectiveness of sustainability reports. In addition, the results suggest that the effect of the certification level is meaningful when the verification criteria are expanded to the global level. The analysis results of this study are expected to be helpful to many stakeholders in establishing a domestic sustainability disclosure certification system in the future.

Keywords

• Sustainability Report
• Third Party Assurance
• IFRS S1
• IFRS S2
• Cost of Capital

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