The objective of this research is to investigate the impact of audit quality on CO2 disclosure in European companies. This article aims to understand how attributes of audit quality, such as auditor effort, auditor permanence and auditor independence, influence the disclosure of CO2 emissions.
A multiple regression analysis on panel data was used. In addition, we applied the fixed effect approach as the optimal and most appropriate model for our main regression. In addition, to control the potential endogeneity problem and to analyse the study data in depth, we used the two-stage Heckman model, the two-stage least squares (2SLS) model, and the generalised method of moments (GMM).
The results clearly show that all the explanatory variables in the study model have a significant influence on CO2 disclosure. Furthermore, the results show a positive effect of auditor effort on the level of CO2 disclosure. However, auditor tenure and auditor independence negatively affect CO2 disclosure.
This study provides empirical evidence of the role of different audit quality proxies on corporate CO2 disclosure, which has been mainly neglected by previous studies and has not yet been examined by previous researchers. Thus, in order to provide an in-depth understanding of this emerging and unprecedented idea, this study fills this research gap and makes a practical and theoretical contribution to the existing literature on corporate governance and environmental disclosure.
