Mutalib Anifowose, Salihin Abang and Muntaka Alhaji Zakari
This paper examines the going concern of integrated reporting <IR> as the pessimistic about its sustainable value relevance is gaining momentous. The study employs a quantitative…
Abstract
Purpose
This paper examines the going concern of integrated reporting <IR> as the pessimistic about its sustainable value relevance is gaining momentous. The study employs a quantitative approach to data analysis and mainly sourced secondary data from integrated reports of 83 sampled companies.
Design/methodology/approach
Utilising data from the companies' integrated reports from 2015 to 2018, the study analyses the impact of <IR> capitals disclosure on corporate sustainable value. <IR> was proxied by its six capital elements, which include financial, manufactured, human, intellectual, natural and social, and relationship capitals, while sustainable value was surrogated by the cost of financing and revenue growth rate. The study develops a checklist and utilises content analysis to score the quality of disclosure by sample companies during the period.
Findings
The longitudinal panel data analysis results reveal that on overall disclosure, <IR> capital has a significant positive effect on the revenue growth but fails to document such on the cost of financing. Meanwhile, on the individual level, human capital and natural capital disclosure have an indirect effect on the cost of financing, while all the six subclassifications affect the revenue growth of the sampled companies.
Research limitations/implications
The study sampled only 83 companies across the region due to the limited availability of data. Therefore, the generalisation of findings might be hindered, and further examination might be considered as more data become available.
Practical implications
The study would support the regulators in developing countries to monitor <IR> practices for their domestic companies. It would assist the International Integrated Reporting Council (IIRC) to review the industry's current <IR> practices and give the reason for better <IR> implementation in the future, from both minority and majority economies.
Originality/value
The study is among the pioneer studies that would consider <IR> research across the Asian continent. The study contributes to the recent discussion about sustainable value relevance of <IR>. Also, it would provide some level of incentive to those charged with governance concerning the voluntary compliance with the <IR> framework.
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Abubakar Ahmed and Mutalib Anifowose
The purpose of this study is to investigate the relationship between corruption, corporate governance and sustainable development goals (SDGs) in Africa.
Abstract
Purpose
The purpose of this study is to investigate the relationship between corruption, corporate governance and sustainable development goals (SDGs) in Africa.
Design/methodology/approach
The authors use panel data from 42 African countries over the period 2017–2020 and ordinary least square regression to test the research hypotheses. The authors also use alternative estimation techniques, including the fixed effect and random effect regressions and the generalized method of moment, to test the robustness of the results.
Findings
The results indicate that corruption negatively affects sustainable development (SD), whereas the effect of corporate governance is positive and significant. In addition, the positive influence of corporate governance on SD is stronger for countries with high corruption prevalence.
Practical implications
Policymakers may rely on the outcome of this study to formulate practical and implementable solutions around corruption and corporate governance that can help toward the achievement of the SDGs. Specifically, corporate governance mechanisms may be relied upon to achieve SD in countries with a high corruption prevalence.
Social implications
The social implication of this paper is that it demonstrates the adverse impact of corruption, which is rife in most African countries. Understanding corruption and the SDGs relationship will promote discussion with overarching implications for developing countries. Overall, the findings can sensitize society to the harmful effects of corruption and the positive effects of good corporate governance.
Originality/value
This paper contributes to literature and practice by demonstrating that corporate governance plays a significant role in the realization of national and global objectives such as the SDGs. This paper also provides novel evidence that corporate governance matters more in countries with a higher corruption incidence.
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Abdifatah Ahmed Haji and Mutalib Anifowose
The purpose of this paper is to explore the implications of IR reforms in South Africa on corporate disclosure practices of South African companies. In particular, the authors…
Abstract
Purpose
The purpose of this paper is to explore the implications of IR reforms in South Africa on corporate disclosure practices of South African companies. In particular, the authors explore initial trends in corporate disclosures following the adoption of IR practice.
Design/methodology/approach
Drawing from Suchman’s (1995) framework of strategic and institutional legitimacy, the authors use content analysis to examine corporate disclosure practices. The authors conduct industry-specific analyses based on various industries to explore corporate disclosures practices across and within various industries in South Africa. The evidence is drawn from 246 integrated reports of large South African companies across six major industries over a three-year period (2011-2013), a period following the introduction of an “apply or explain” IR requirement in South Africa.
Findings
The results first show a significant increase in the overall amount of corporate disclosures following the adoption of IR practice. In particular, the authors find that intellectual capital and human capital disclosure categories have increased over time, with relational capital disclosures showing a decreasing trend. Second, the authors find that corporate disclosures are increasingly becoming institutionalised over time across and within industries following the adoption of IR practice. However, companies fail to provide meaningful disclosures on the interdependencies and trade-offs between the capitals, or components of a capital following the adoption of IR practice. Overall, the authors find that companies use specific disclosure strategies to respond to external pressures (strategic legitimacy), and that such disclosure strategies are increasingly becoming institutionalised across and within various industries (institutional legitimacy).
Practical implications
The theoretical implication of this study is that the strategic and institutional perspectives of legitimacy theory are complementary, rather than conflicting, and dovetail to explain corporate reporting practices. In terms of practical implications, the adoption of specific reporting frameworks such as the emerging IR framework is a double-edged sword. On the one hand, such reporting frameworks could potentially enhance comparability and consistency of organisational reports across and within industries. On the other hand, corporate reports could become a set of monotonous reports motivated by considerations other organisational accountability. Hence, to overcome the latter, this study emphasises the importance of specific accountability metrics and reporting guidelines, rather than the current generic IR guidelines, to enhance organisational reporting practices.
Originality/value
The paper’s longitudinal analysis of a large sample of integrated reports following the adoption of IR practice has the potential to inform growing academic research and ongoing policy initiatives for the emerging IR agenda.
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Mutalib Anifowose, Hafiz Majdi Abdul Rashid and Hairul Azlan Annuar
The purpose of this paper is to examine the relationship between IC disclosure and the corporate market value (CMV) of listed firms on the main board of Nigeria Stock Exchange and…
Abstract
Purpose
The purpose of this paper is to examine the relationship between IC disclosure and the corporate market value (CMV) of listed firms on the main board of Nigeria Stock Exchange and to test the moderating effect of religious and ethnic composition of board members on the relationship.
Design/methodology/approach
This study applies the signaling and upper echelons theories in formulating four hypotheses that guide the results analysis. By employing a two-step dynamic system generalized method of moments and controlling for the possible endogeneity effect on the parameters estimated for a sample of 91 listed firms on main board of Nigeria Stock Exchange, this study investigates the association of IC disclosure with CMV, namely, cost of capital and market capitalization, and the moderating role of religious and ethnic composition on such association using data over the 2010 to 2014 financial years.
Findings
The results show a significant positive relationship between overall IC disclosure and market capitalization and a negative impact on cost of capital, which are in line with the hypothesized propositions. The moderating effect of board diversity is also confirmed. This study contributes to recent evidence concerning the value relevance of IC information to investors and other interested stakeholders and the established moderating role of board diversity in IC disclosure-related studies.
Practical implications
The regulators may consider development of standards on board composition about religious and ethnic composition in order to curb the domination from same group in the board room. Those charged with governance should be concerned with the disclosure of IC information in the financial statements as it has value relevance to the investors, in line with signaling theory.
Social implications
The ethnic and religious composition of board members is a significant factor within the board room and needs to be given adequate consideration.
Originality/value
This study is the first to consider IC disclosure across whole sectors in the Nigerian economy and looks upon ethnicity and religious affiliation of boards as moderating variables. The study controls for heteroscedasticity and endogeneity issues by adopting two-step dynamic system generalized method of moments.
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Mutalib Anifowose, Hafiz Majdi Abdul Rashid, Hairul Azlan Annuar and Hassan Ibrahim
The purpose of this paper is to examine the value relevance of intellectual capital (IC) by analysing the relationship between IC efficiency (ICE) and corporate book value of…
Abstract
Purpose
The purpose of this paper is to examine the value relevance of intellectual capital (IC) by analysing the relationship between IC efficiency (ICE) and corporate book value of listed firms on main board of Nigeria Stock Exchange.
Design/methodology/approach
This study applies the resource-based theory in formulating two hypotheses that guide the results analysis. By employing a two-step dynamic system generalised method of moments (GMMs), and controlling for the possible endogeneity effect on the parameters estimated, for a sample of 91 listed firms on main board of Nigeria Stock Exchange, this study investigates the association of ICE and corporate book value, namely, cash flow from operation and economic value added (EVA), using data over the 2010 to 2014 financial years.
Findings
The results show a significant positive relationship between overall ICE and corporate book value (cash flow from operation and EVA). This study contributes to recent evidence concerning the value relevance of IC information to investors and other interested stakeholders.
Research limitations/implications
The generalisation of the results to smaller firms, in the alternative securities market, may be inappropriate as study sampled listed firms on the main board of Nigerian Stock Exchange.
Practical implications
Those charged with governance should be concerned with the investment and management of IC as it enhances the economic value and operating cash flow in line with the resource-based theory.
Originality/value
This study is first to consider the ICE study across all sectors in the Nigerian economy using modified Pulic value added intellectual capital. The study controls for heteroscedasticity and endogeneity issues by adoption of two-step dynamic system GMMs.
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Abdifatah Ahmed Haji and Mutalib Anifowose
The purpose of this paper is to examine the trend of integrated reporting (IR) practice following the introduction of an “apply or explain” IR requirement in South Africa. In…
Abstract
Purpose
The purpose of this paper is to examine the trend of integrated reporting (IR) practice following the introduction of an “apply or explain” IR requirement in South Africa. In particular, the authors examine whether the IR practice is ceremonial or substantive in the context of a soft regulatory environment.
Design/methodology/approach
By way of content analyses, the authors examine the extent and quality of IR practice using an IR checklist developed based on normative understanding of existing IR guidelines. The evidence is drawn from 246 integrated reports of large South African companies over a three-year period (2011-2013), following the introduction of IR requirement in South Africa.
Findings
The results show a significant increase in the extent and quality of IR practice. The findings also reveal significant improvements in individual IR categories such as connectivity of information, materiality determination process and reliability and completeness of the integrated reports. However, despite the increasing trend and evidence of both symbolic and substantive IR practice, the authors conclude that the current IR practice is largely ceremonial in nature, produced to acquire organisational legitimacy.
Practical implications
For academics, the authors argue that there is a need to move away from the “what” and “why” aspects of the IR agenda to “how” IR should work inside organisations. In particular, academics should engage with firms through interventionist research to help firms implement integrated thinking and substantive reporting practices. For organisations, the findings draw attention to specific aspects of IR that require improvement. For policymakers, the study provides evidence based on the developmental stage of IR practice and draws attention to certain areas that need clarification. In particular, the International Integrated Reporting Council and Integrated Reporting Committee of South Africa should provide detailed guidelines on connectivity of information, material issues and disclosure of multiple capitals and their trade-offs. Finally, for educators, in line with the ACCA’s embedment of IR in its accounting courses, there is a need to incorporate IR in the curriculum; in particular, the authors argue that the best way to advance IR is in a “ubiquitous” spread in accounting and management courses.
Originality/value
This study provides empirical account of IR practice over time in the context of a regulatory IR environment. The construction of an IR checklist developed based on normative understanding of local and international IR guidelines is another novel approach of this study.
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Abdifatah Ahmed Haji and Mutalib Anifowose
This paper aims to examine the role of the audit committee function as an internal assurance provider in the emerging integrated reporting (IR) practice. In particular, the…
Abstract
Purpose
This paper aims to examine the role of the audit committee function as an internal assurance provider in the emerging integrated reporting (IR) practice. In particular, the authors examine the role of the overall effectiveness, as well as specific aspects, of the audit committee function in IR practice.
Design/methodology/approach
The authors examine the integrated reports of 246 firm-year observations of large South African companies over a three-year period (2011-2013), following the introduction of an “apply or explain” IR requirement and an embedded “combined assurance” model in South Africa. Drawing from conflicting theoretical perspectives of economics-based (e.g. agency theory) and socio-political theories (e.g. legitimacy theory), the authors develop competing hypotheses to predict the role of the overall, as well as specific aspects, of the audit committee function in IR practice.
Findings
Consistent with the predictions of economics-related theories, the authors find that the overall effectiveness of the audit committee function has a strong positive association with the extent and quality of IR practice. In particular, audit committee authority and meetings are shown to have a significant positive impact on IR practice. However, as implied by socio-political theories, the authors do not find a significant association between key aspects of the audit committee function such as audit committee independence and financial expertise and IR practice.
Practical implications
This study informs local and international regulatory authorities, as well as the business community, about the potential significance of internal assurance mechanisms such as the audit committee function in the emerging IR practice. Given the practical challenges associated with independent external assurance provisions, the findings of this study suggest that internal assurance mechanisms – such as the audit committee function – can be genuine and cost-effective alternative assurance mechanisms in enhancing the credibility and reliability of non-financial reporting practices, particularly the emerging IR practice. The results also inform academic researchers to take cognisance from the expanding roles and responsibilities of audit committees and conduct in-depth investigation on “how” the audit committee function is handling the increasing responsibilities.
Originality/value
The study provides initial empirical account towards the role of the audit committee function in the emerging IR practice. The study is novel because it shows the significance of internal assurance mechanisms in wider organisational reporting practice.
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Inakshi Kapur, Pallavi Tyagi and Neha Zaidi
Purpose: This chapter aims to identify and evaluate the various components of business model disclosures in an Integrated Report and ascertain how the notion of business model is…
Abstract
Purpose: This chapter aims to identify and evaluate the various components of business model disclosures in an Integrated Report and ascertain how the notion of business model is perceived among practitioners.
Need for the Study: According to previous research, the International Integrated Reporting Council’s (IIRC) objective of improving corporate reporting by encouraging organisations to disclose their business model has not found the desired recognition. Therefore, the study elaborates on the various components of business model reporting and their implications on corporate reporting in general.
Methodology: A review of literature was conducted to identify and analyse research based on business models and their disclosures in integrated reporting. A narrative review was undertaken for selected literature.
Findings: The findings suggest that most large-sized organisations use integrated reporting for impression management and are not inclined to disclose too much about their business models for fear of competition. There is still a lack of clear understanding of what a business model should entail.
Practical Implication: This study adds to the research on business model disclosures in integrated reporting. Voluntary disclosure and a better understanding of such disclosures will prepare organisations of all sizes and industries for an event when Integrated Reporting becomes statutory.
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Manimore Makri, Leo Themjung Makan and Kailash Chandra Kabra
This paper aims to examine the influence of board characteristics on the integrated reporting quality (IRQ) of Indian-listed companies.
Abstract
Purpose
This paper aims to examine the influence of board characteristics on the integrated reporting quality (IRQ) of Indian-listed companies.
Design/methodology/approach
The study uses a sample of 197 firms from the BSE 500 for the years 2017–2018 to 2019–2020. The proposed hypotheses are tested using two-stage least squares regression.
Findings
The study documents a positive influence of board size, board independence and gender diversity on IRQ. The study also finds that board activity and role duality are insignificant with IRQ. Among the firm-specific characteristics, variables such as firm size, profitability and capital intensity positively influence IRQ.
Originality/value
The current study presents the first investigation in the context of India on the various board characteristics influencing IRQ. The study reiterates the role that gender-diverse boards have in improving information transparency. Policymakers can therefore drive adoption by recommending changes in board characteristics and increasing the quota for women on boards.