Board configuration and IR adoption. Empirical evidence from European companies

Abstract

Over the last few years, companies are increasingly international, and a growing number of stakeholders is affected by the sustainability aspects of business, resulting in significant changes in how corporate information is both perceived and published. This scenario has led to many company Boards of Directors (BoD) voluntarily adopting a new communication tool, known as Integrated Reporting, (IR) which is a single disclosure document that satisfies stakeholders’ increasing need for information. This study wants to contribute to existing literature on the relationship between corporate governance and IR, investigating if board configuration (size, gender, and average age) influences its adoption. The analysis relies on a sample of 1,047 companies from 18 European countries for the year 2015. These results show a positive relationship between the decision to adopt IR and board size and female board members, whereas the older board members have a negative effect on it. Our findings present implications both from the theoretical and practical point of view. On a theoretical level, the research confirms that board diversity needs to be analysed more in detail, because of its contribution to company’s transparency. Moreover, the results provide to standard setters and regulators a useful insight of the important distinction among various board members’ features.

Board characteristics and integrated reporting quality: an agency theory perspective

“…Independent variables are defined as follows: board size (BOARDSIZE) is measured by the number of directors on the board (Frias‐Aceituno et al, 2013a; Alfiero et al, ); board independence (BOARDIND) is measured as the percentage of nonexecutive directors within the board (De Andres, Azofra, & Lopez, ; Frias‐Aceituno et al, 2013a); board diversity (BOARDDIV) is measured by the percentage of women on the board (Frias‐Aceituno et al, 2013a; Liao et al, ; Alfiero et al, ); and board activity (BOARDACT) is measured by the number of annual meetings of the board of directors (Frias‐Aceituno et al, 2013a).…”

“…Fasan and Mio () have instead found an opposite result whereby the presence of women on a board reduces the materiality disclosure quality. In relation to foreign diversity, Frias‐Aceituno et al (2013a) highlighted the absence of associations between the presence of foreign members on the board and the adoption of integrated reporting, whereas, in relation to age diversity, Alfiero et al () found that older members have a negative effect on decisions to compile an integrated report.…”

“…Boards of larger sizes can therefore offer further perspectives and a wider range of solutions to allow the achievement of investors' objectives (Eisenhardt & Bourgeois, ). Integrated reporting, due to its multidimensional nature, requires input from members with different backgrounds and skills (Alfiero et al, ; Frias‐Aceituno et al, 2013a). The development of a high‐quality integrated report, able to show the existing interconnections between the different types of information, requires a continuous dialogue and a comparison between different members of the board.…”

“…Therefore, some researchers have extended the scope of these studies to integrated reporting. In this regard, some studies have analysed the impact of gender diversity (Alfiero, Cane, Doronzo, & Esposito, 2017;Fasan & Mio, 2017;Frias-Aceituno et al, 2013a;García-Sánchez & Noguera-Gámez, 2018;Gerwanski et al, 2019;Kilic & Kuzey, 2018), whereas others examined foreign diversity (Frias-Aceituno et al, 2013a) and age diversity (Alfiero et al, 2017). In relation to gender diversity, Frias-Aceituno et al (2013a) found that the presence of women on the board favours the adoption of integrated reporting.…”

“…(2013a) highlighted the absence of associations between the presence of foreign members on the board and the adoption of integrated reporting, whereas, in relation to age diversity, Alfiero et al (2017) found that older members have a negative effect on decisions to compile an integrated report.…”