Textual Analysis of Sustainability Reports: Topics, Firm Value, and the Moderating Role of Assurance

In this study, we use textual analysis to identify key topics within standalone sustainability reports and evaluate their association with firm value, both currently and in the future. We also investigate the role of sustainability assurance in moderating this impact. We extract sustainability topics using Latent Dirichlet Allocation (LDA), test our hypotheses using regression analysis, and conduct supplementary analysis employing Discrete Bayesian Network (DBN) and Shapley Additive Explanations (SHAP) to support our main findings. The main topics identified from the reports include environmental issues, sustainable consumption, daily necessities, socio-economic impact, and healthcare. When the moderating effect of assurance is factored in, we notice a significant change in how these topics influence firm value. Environmental issues and sustainable consumption have a notable impact one and two years after being addressed, whereas daily necessities affect firm value immediately and a year after coverage. However, the impact of the healthcare topic wanes after two years when assurance is considered. Interestingly, we find assurance to influence negatively firm value a year after addressing environmental and socio-economic topics. This may imply that the initial coverage of these topics can be unfavorably perceived, or that assurance agencies can identify performance gaps due to regulatory changes, resulting in this negative impact.