Can Internal Mechanism be an Implicit Assurance? Subordinate Monitoring, Environmental Decoupling and Social License in ASEAN-5 Countries
Ari Budi Kristanto  1, 2@  , June Cao  1@  , Piyush Sharma  1@  
1 : Curtin University
2 : Satya Wacana Christian University

In the early stages of environmental disclosure assurance, the adoption of external assurance is often influenced by cost-benefit considerations and concerns over its independence. This study examines whether subordinate monitoring can be an implicit assurance mechanism to maintain environmental integrity. We specifically focus on the ASEAN-5 countries, which are characterized by high climate-related vulnerabilities and complex climate-economic dynamics. Draw on upper-echelon theory and the new institutional accounting perspective, we find that firms with stronger subordinate monitoring are less likely to engage in environmental decoupling. This finding holds after addressing potential endogeneity through a battery of tests. Our further analyses reveal that subordinate monitoring complements both formal and informal mechanisms to prevent environmental decoupling. As a result, we find that, consistent with the social contract view, firms with higher environmental decoupling are less likely to secure social license. This research highlights a strategic perspective of a multi-layered approach to assuring the integrity of environmental disclosures to maintain corporate social license. Subordinate monitoring serves as an implicit assurance mechanism, particularly valuable in the nascent stage of external assurance.


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