The value relevance of integrated reporting quality: evidence from Asia

Abstract

Purpose

Integrated reporting (IR) aims to overcome the limitations of traditional reporting by merging financial information and sustainability data. Therefore, this paper aims to investigate whether IR quality is value-relevant for investors in the voluntary Asian context.

Design/methodology/approach

The study uses OLS regression to estimate the impact of IR quality on the market value of equity using data from Asian firms that prepare IR, presented on the International Integrated Reporting Council (IIRC) website for 2015–2022. The study uses content analysis to assess IR quality. Alternative measures of firm value, propensity score matching and instrumental variable estimation are used to validate the robustness of the main results.

Findings

The findings of this paper suggest that IR quality is value-relevant and has positive market reactions. Additional analyses show that the positive impact of IR quality is more salient for companies with high organizational complexity and high growth, and the impact is still significant during the COVID-19 pandemic period. Furthermore, the authors document that earnings quality and analyst forecast accuracy mediate the relationship between IR quality and market value.

Research limitations/implications

The study has some limitations, primarily stemming from the relatively small sample size and the fact that the majority of the data represents Japan.

Practical implications

The findings of this study have implications for standard setters, governmental agencies interested in adopting IR, as well as investors and businesses about the effects of IR quality.

Originality/value

Most of the recent studies are concentrated on mandatory IR adoption in South Africa. This study is unique in concentrating on the value relevance of IR quality in the voluntary Asian context.

Citation

Radwan, S.R.A. and Xiongyuan, W. (2024), "The value relevance of integrated reporting quality: evidence from Asia", Journal of Financial Reporting and Accounting, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JFRA-10-2023-0584