Ruhama Bezerra Fernandes and Alexandro Barbosa
This paper aims to investigate the factors associated with the voluntary disclosure of integrated reporting (IR) in Brazil of the companies listed on the stock exchange – Brasil…
Abstract
Purpose
This paper aims to investigate the factors associated with the voluntary disclosure of integrated reporting (IR) in Brazil of the companies listed on the stock exchange – Brasil, Bolsa, Balcão. The cultural dimensions of a nation reflect different priorities in accounting practices. The Brazilian case, therefore, becomes significant, as Brazil is increasingly important in world markets.
Design/methodology/approach
As an explanatory econometric model, multinomial logistic regression was used (Y = 2 to describe the probability of the IR disclosure; Y = 1 to describe the occurrence of reports with practices similar to the IR and Y = 0 to describe the occurrence of non-disclosure of non-financial reports). Applied to panel data with random effects (chosen for best performance) in the period from 2016 to 2019.
Findings
Reveals the positive association of the company’s profitability and market-to-book with the probability of the IR disclosure. Regarding the board composition, it is suggested that size does not make a difference, with the greater participation of women and independence of directors associated with better probabilities of adopting the IR in Brazil.
Originality/value
This work is the first to characterize the Brazilian reality of voluntary disclosure, specifying the implementation of IR, compared to publishing reports similar to the IR and not reporting structured non-financial statements. It can also be considered the first study on the relevance of the board structure in the disclosure of IR by Brazilian companies. Finally, it contributes to the literature on IR adoption, bringing practical results in understanding the most favorable conditions in which the IR framework will be fully implemented.
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Michael Grassmann, Stephan Fuhrmann and Thomas W. Guenther
Integrated reporting (IR) aims to provide disclosures of the connectivity of non-financial and financial value creation aspects. These disclosures are defined as the disclosed…
Abstract
Purpose
Integrated reporting (IR) aims to provide disclosures of the connectivity of non-financial and financial value creation aspects. These disclosures are defined as the disclosed connectivity of the capitals resulting from integrated thinking. This paper aims to investigate the extent of disclosed connectivity of the capitals in integrated reports and its underlying managerial discretion by drawing on economic-based theories.
Design/methodology/approach
Regression analyses are applied to examine the associations between economic firm-level characteristics and the extent of disclosed connectivity of the capitals. The analyses are based on a content analysis of 169 integrated reports disclosed in 2013 and 2014 by Forbes Global 2000 companies.
Findings
This paper finds high heterogeneity in the extent of disclosed connectivity of the capitals in current IR practice. This heterogeneity is related to drivers arising from economic-based theories. Firms’ non-financial and financial performance and the importance of strategic shareholders and debt providers are positively associated with the extent of disclosed connectivity of the capitals. The complexity of the business model and a highly competitive environment are negatively associated with the extent of disclosed connectivity of the capitals.
Research limitations/implications
This paper extends qualitative IR studies on the disclosed connectivity of the capitals by quantitative results from a content analysis for a cross-sectional and global sample. Additionally, this study adds to prior IR literature on the drivers of the binary decision to disclose an integrated report by focusing on the extent of disclosed connectivity of the capitals.
Practical implications
For report preparers, users and standard setters, the results reveal that perceived cost-benefit considerations (signaling vs. direct and proprietary costs) may explain managerial discretion regarding the connectivity of the capitals within integrated reports.
Social implications
This paper examines integrated reports, which are intended to inform providers of financial capital and other stakeholders about the connectivity of the six capitals of the IR framework.
Originality/value
This paper develops a metric disclosure measure of the extent of disclosed connectivity of the capitals. It provides initial evidence of how the IR framework’s focus on this key characteristic is realized in disclosure practice. Concerns about competitive disadvantages and preparation costs limit this key characteristic of integrated reports.
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Brigitte de Graaff and Bert Steens
The purpose of this paper is to explore the perceived benefits of integrated reporting (IR) and factors influencing the motives that supervisory board members (SBMs) have for…
Abstract
Purpose
The purpose of this paper is to explore the perceived benefits of integrated reporting (IR) and factors influencing the motives that supervisory board members (SBMs) have for advocating a change towards IR implementation.
Design/methodology/approach
An exploratory survey study was conducted to investigate the influence of external market conditions, internal organizational conditions and observed benefits on the motivation to advocate IR adoption in companies that have not yet implemented IR. A unique set of survey data from 62 SBMs of Dutch companies was used for analysing the propositions derived from IR literature and based on institutional theory, legitimacy theory and diffusion of innovation theory.
Findings
The respondents indicated to be supportive of IR adoption. SBMs who had experienced the implementation of IR observed that IR offers benefits. Their motives for advocating a change towards IR in companies that had not implemented IR were influenced most by the observed benefits in IR companies. SBMs only involved in companies that had not adopted IR are motivated to support IR adoption to a similar extent. These findings suggest that directly observed benefits by SBMs need to exceed a considerable minimum level before these SBMs are more motived to advocate IR than their peers who have not witnessed the implementation of IR and that experiences are shared across companies. The motivation of both groups is influenced by external market conditions but not by internal organizational conditions.
Practical implications
The findings have implications for potential IR adopters and institutions promoting the further diffusion of IR as they emphasize the need for tangible benefits of IR and confirm that sharing good practices and benefits of IR can provide a catalyst for IR adoption. The findings contribute to the understanding of the motivation of SBMs as an important organizational condition for implementing IR as this study provides insights in the factors that drive this motivation of key actors influencing the decision to implement IR. Furthermore, the finding that these factors predominantly comprise tangible results and external market conditions is relevant from an organizational change perspective.
Social implications
Understanding the mechanisms of IR-adoption decisions provides a relevant basis for deploying programmes promoting IR as a general reporting standard. This could provide society and a broad range of stakeholders with access to information incorporated in integrated reports. It could ultimately have a major impact on society by improving decision-making and increasing the long-term sustainability of organizations and their relations with stakeholders.
Originality/value
This study provides preliminary empirical evidence concerning the perspectives of SBMs on their motives for advocating IR, based on a unique sample from a country that has been involved with IR from its start.
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This paper aims to unite firm- and country-level drivers of the disclosure of integrated reports. It creates a synopsis of voluntary disclosure, signaling, proprietary cost…
Abstract
Purpose
This paper aims to unite firm- and country-level drivers of the disclosure of integrated reports. It creates a synopsis of voluntary disclosure, signaling, proprietary cost, legitimacy, stakeholder and institutional theory.
Design/methodology/approach
The empirical analyses build on a logistic regression model examining the disclosure decisions for integrated reports published between 2012 and 2016 by the 2,000 largest listed companies worldwide.
Findings
The results indicate that the disclosure of integrated reports by large listed companies is explained in parallel by multiple theories, operationalized by the firm-level characteristics of lower profitability, a higher market-to-book value, lower leverage, lower level of industry concentration and higher social performance. Additionally, the country-level characteristics of civil law setting and lower investor protection, lower power distance and lower masculinity coincide with the disclosure of integrated reports.
Originality/value
The inferences emphasize that a single theoretical framework cannot explain the decision to disclose an integrated report. Rather, a set of economic firm characteristics may lead to different disclosure decisions in different socio-economic and institutional environments.
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Isabel-Maria Garcia-Sanchez, Nicola Raimo and Filippo Vitolla
This study aims to analyse the role that the chief executive officer (CEO) has on integrated reporting (IR) adoption and whether this role is moderated by incentives to promote…
Abstract
Purpose
This study aims to analyse the role that the chief executive officer (CEO) has on integrated reporting (IR) adoption and whether this role is moderated by incentives to promote corporate transparency, including information asymmetry problems and financial constraints. IR represents the last frontier of corporate disclosure and aims to represent, through the annual integrated report, the ability of an organization to create value over time.
Design/methodology/approach
This study is based on 10,819 observations (an unbalanced data panel of 1,588 firms for the period 2009–2017). A logistic regression model is used to examine the association between CEO power and disclosure of an integrated report.
Findings
The results show that CEOs with greater power oppose the disclosure of integrated information, and this behaviour is not modified by firms’ incentives. Furthermore, greater growth opportunities increase CEO opposition to disclosing integrated information on the creation of value, perhaps as a consequence of the possible use of it by competitors.
Originality/value
This study contributes to the existing literature. First, it expands the scientific debate on the topic of IR. Second, it extends the application field of agency theory, which is seldom used to explain the phenomena related to IR.
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Lucrezia Songini, Anna Pistoni, Francesco Bavagnoli and Valentina Minutiello
Despite the expected benefits to stakeholders, as well as the number of contributes aiming at identifying and proposing best practices on the integrated reporting (IR) adoption…
Abstract
Despite the expected benefits to stakeholders, as well as the number of contributes aiming at identifying and proposing best practices on the integrated reporting (IR) adoption, it seems that the IR struggles to be diffused in companies. Several are the reasons explaining this evidence. It could mainly be the consequence of some critical issues underlying IR implementation, such as difficulties in the complete application of the IR framework.
Strictly related to this last aspect is the topic of the IR quality that recently has begun to gain interest both in the literature and in the empirical research. Particularly, the issues of IR quality and its determinants now appear to be more important than the IR quantity.
Starting from these premises, this chapter aims to identify the determinants of IR quality. The authors have identified main drivers of IR quality, considering previous studies on voluntary disclosure and in particular on corporate social responsibility (CSR) and sustainability disclosure while with reference to the quality assessment of IR, the authors have used the Integrated Reporting Scoreboard, recently proposed in the literature.
After developing the research hypothesis, an empirical analysis has been carried out on a sample of IRs issued by 55 companies in a three-year period.
The main research results highlight, on the one hand, that the main determinants of IR quality are the country where the company operates, in particular European ones and mandatory IR countries; on the other hand, industry and firm’s size don’t seem to have a positive impact on IR quality.
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Merve Kılıç, Ali Uyar, Cemil Kuzey and Abdullah S. Karaman
The objective of this study is to investigate whether the institutional environment is associated with the adoption of integrated reporting.
Abstract
Purpose
The objective of this study is to investigate whether the institutional environment is associated with the adoption of integrated reporting.
Design/methodology/approach
The sample of the study is based on the firms included in the list of Fortune Global 500. The logistic regression analysis was run to test the proposed hypotheses.
Findings
The findings indicated that the code-law orientation and strength of the institutional quality are significantly associated (i.e. positively and negatively, respectively) with the integrated reporting of Fortune 500 companies. Firms are motivated for more transparency in stakeholder-oriented and weakly regulated contexts. Thus, stakeholder pressure is more influential than shareholder interest in motivating or forcing firms to issue integrated reports. Besides, there appears to be a trade-off between the public sector and the private sector in terms of ensuring an accountable and transparent business environment. If the public sector does not undertake its role in ensuring a transparent business environment, the private sector fills the gap. The results are robust to alternative sampling and methodologies.
Research limitations/implications
This study implied that the stakeholder orientation of countries fosters the transparency and accountability of firms. Corporate behavior is impacted by the institutional strength or weakness of nations. The institutional theory provides an appropriate ground to understand drivers of corporate reporting practices of firms beyond firm-level characteristics.
Practical implications
The adoption of integrated reporting framework by Fortune 500 companies can be leveraged to alleviate concerns about their social and environmental impacts. Policy-makers in the countries which have a weak institutional environment force or encourage their firms to increasingly meet the transparency and accountability demands of society.
Social implications
The research findings might play an encouraging role in that various stakeholders (i.e. customers, public, civil organizations and press) should undertake active roles and responsibilities to encourage firms to behave in socially and environmentally responsible ways.
Originality/value
This study adds to the literature by examining the influence of the institutional environment on the adoption of integrated reporting, using recent international data, and focusing on the largest companies according to the Fortune's annual Global 500 list. This study is one of the first to examine the association between a set of governance characteristics (i.e. board size, board independence and board diversity) and integrated reporting adoption.
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Ana Isabel Lopes and Ana Margarida Coelho
The purpose of this paper is twofold: to provide evidence on geographic and firm-level characteristics within organizations using integrated reporting (<IR>) methodology to…
Abstract
Purpose
The purpose of this paper is twofold: to provide evidence on geographic and firm-level characteristics within organizations using integrated reporting (<IR>) methodology to communicate their business model to stakeholders; and to shed light on the contend of integrated reports of organizations that have been recognized as leading practice by a reputable award process or through benchmarking.
Design/methodology/approach
Secondary analysis of data (descriptive and inferential statistics) is used for a sample of 224 organizations (79 classified as <IR> Reference Reporters and 145 as <IR> Regular Reporters) across 26 countries (2011 to mid-2015). Content analysis is used for <IR> Reference Reporters.
Findings
Evidence for the first objective suggests that compared with <IR> Regular Reporters, the majority of the <IR> Reference Reporters are from Europe, are larger, have a higher market value, are more profitable and are less leveraged. Evidence for the second objective reveals that the guiding principles, fundamental concepts and content elements of the most recent integrated report published by each <IR> Reference Reporter (leading practice) seem less than expected.
Research limitations/implications
<IR> Examples Database does not cover all of the organizations reporting according to the <IR> framework. Content analysis can be biased by authors’ interpretations.
Practical implications
Potential benefit both to researchers and to those involved in the reporting of financial and non-financial information using the <IR> tool.
Originality/value
The originality of the paper is as follows: it contributes to the international debate on the evolution from sustainability to <IR>, provides evidence on geographies and firm-level characteristics of organizations using <IR> to better communicate and provides the most prominent information disclosed by Reference Reporters.
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Francesca Manes-Rossi, Giuseppe Nicolò, Adriana Tiron Tudor and Gianluca Zanellato
This paper aims to explore the emerging phenomenon of integrated reporting (IR) in the context of state-owned enterprises (SOEs) and proposes a longitudinal analysis of the level…
Abstract
Purpose
This paper aims to explore the emerging phenomenon of integrated reporting (IR) in the context of state-owned enterprises (SOEs) and proposes a longitudinal analysis of the level of IR disclosure (IRD) provided by a sample of European SOEs for the period 2013–2017, in accordance with IR framework requirements. The study also proposes an analysis of the possible explanatory factors driving the level of IRD. Specific attention is devoted to examine the influence exerted by the public ownership on the level of IRD provided by SOEs.
Design/methodology/approach
The IRs published by a balanced sample of 18 European SOEs between 2013 and 2017 were examined through a manual content analysis. Several analyzes were performed to assess the relationship between the level of IRD provided by SOEs and some possible determinants.
Findings
Results show an increasing level of disclosure during the observed period, confirming the relevance of IR as a tool for transparency and accountability within the context of SOEs. Statistical analyzes show that government ownership, external assurance, investor protection and global reporting initiative guidelines adoption positively affect the level of IRD, while SOE size exerts a negative influence.
Originality/value
As this paper examines a context which has been under-investigated, it presents fresh knowledge about the evolution of IR adoption by European SOEs. Furthermore, this paper identifies some of the explanatory factors that drive the preparation of IR, thus providing international integrated reporting council, policymakers and standard-setters with the relevant information for inclusion in specific guidelines for IR by SOEs.
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Nicola Raimo, Alessandra Ricciardelli, Michele Rubino and Filippo Vitolla
Human capital (HC) represents a particularly important element capable of guiding the firms’ value creation process in the new economy. The purpose of this study is to analyze the…
Abstract
Purpose
Human capital (HC) represents a particularly important element capable of guiding the firms’ value creation process in the new economy. The purpose of this study is to analyze the level of HC information contained within integrated reports and to identify the variables that influence the HC disclosure policies of companies.
Design/methodology/approach
Research hypotheses, developed on the basis of agency theory, were tested using a regression model on a sample of 137 worldwide companies. A HC disclosure index was designed to examine the level of HC disclosure and a content analysis was used to investigate the integrated reports.
Findings
Results showed a positive and significant impact of firm size, board size, board independence and board diversity on the level of HC information disclosed by companies within their integrated reports. On the contrary, they demonstrated a not significant effect of firm profitability.
Practical implications
Results have important implications for corporate executives, high-level corporate governance, policymakers and investors. They point out additional further motivations for creating larger boards and including non-executive members and women on the board. In addition, investors could use the HC disclosure index to evaluate companies’ HC disclosure policies in their investment decisions.
Originality/value
This study extends the agency theory application scope and extends the analysis of HC disclosure to other corporate documents, namely, integrated reports. Besides, it increases knowledge about the factors capable of influencing HC disclosure, identifying a series of elements capable of directly affecting the level of information that companies disclose.