Integrated reporting adoption in SMEs: incentives and disincentives

Abstract

Purpose

This study aims to investigate the drivers and challenges of integrated reporting (IR) adoption in the Hungarian SME context.

Design/methodology/approach

The study uses qualitative methods to conduct an in-depth analysis of small and medium enterprises’ (SMEs) drivers and challenges of IR adoption through semi-structured interviews. Further, the results of the interview are supported by content analysis.

Findings

The research highlighted the drivers for IR adoption, including growing the company’s customer base, attracting new investors, boosting competitiveness and increasing the company’s market value by improving the long-, medium- and short-term value creation. Nonetheless, the organizational transformation required to implement IR, a lack of qualified human resources, weak administrative control and poor documentation all serve as impediments to Hungarian SMEs implementing IR. Consequently, the current IR framework needs further clarification and simplification to be practical for SMEs. Integrated thinking, value creation, materiality and stakeholder engagement are the concepts that have been identified as being unclear or inapplicable for SMEs.

Practical implications

Furthermore, the practical implications for standard-setters, regulators and companies may help in the future in mitigating barriers, pushing companies to learn more about the benefits and risks of adopting IR.

Originality/value

The study is one of the few that examines the drivers and challenges of IR adoption in SMEs and responds to several academic requests for IR research on the reasons why SMEs do not participate in IR adoption. Also, the study compiles and evaluates the previous literature’s drivers and challenges for IR adoption. Furthermore, the practical implications for standard-setters, regulators and companies may help in the future in mitigating barriers, pushing companies to learn more about the benefits and risks of adopting IR.

Citation

Nada, O.H.A. and Győri, Z. (2024), "Integrated reporting adoption in SMEs: incentives and disincentives", Journal of Financial Reporting and Accounting, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JFRA-02-2024-0082