Disclosure quality under Integrated Reporting: A value relevance approach

Does Integrated Reporting Enhance the Value Relevance of Information? Evidence from Sri Lanka

“…In this context, this study examines the relationship between the intensity of IR based on the extent of adoption of IIRF and the value relevance of the information disclosed in the integrated reports in a developing country context where IR is a voluntary exercise. Hence, this study differs from previous studies, such as those by Baboukardos and Rimmel [8], Zhou et al [9], and Cortesi and Vena [10], that evaluated the value relevance of IR without considering the extent of adoption of IIRF. Further, this study differs from that by Lee and Yeo [7], who analyzed the extent of adoption of IIRF in a mandatory context, and by Cortesi and Vena [10], who did not consider the value relevance of IR in the context of a particular country.…”

“…Loprevite et al [42] found that the value relevance of accounting information is higher in IR-adopting companies than in non-adopters in the European Union. In their study covering 57 countries, where IR is adopted voluntarily, Cortesi and Vena [10] showed IR enhances corporate disclosure, reduces information asymmetries, and increases the quality of reported earnings per share. On the other hand, Vitolla et al [43] showed a positive association between IR quality and cost of capital based on a sample of 116 international firms engaged in IR.…”

“…While all these studies took place in a mandatory setting, they did not consider the extent of adoption of IR in analyzing the value relevance of IR, except for Lee and Yeo [7]. Moving beyond a mandatory setting, Cortesi and Vena [10], in a cross-country study, found IR enhances corporate disclosure, reduces information asymmetries, and increases the quality of reported earnings per share, but does not positively influence the value relevance of book value. Although Cortesi and Vena [10] extended the value relevance of IR to voluntary contexts, a severe lapse in their study was found due to their neglect of the extent of adoption of IIRF in the preparation of integrated reports More specifically, Cortesi and Vena [10] have identified the adoption of IR only as a dummy variable in the model, where 1 is given if a company has adopted IR and otherwise 0 is assigned.…”

Does it pay off? Integrated reporting and cost of debt: European evidence

“…They argue that IR mitigates agency costs and leads to a better information environment for investors. Likewise, Cortesi and Vena (2019) confirm that the voluntary adoption of IR decreases information asymmetries and is rewarded by shareholders, who trade shares of IR‐compiling firms at a premium. In a similar vein, Lee and Yeo (2016) reveal that IR and firm value are positively associated, especially among firms with high organizational complexity and external financing needs, indicating that IR leads to lower information processing costs for investors.…”

“…The results not only suggest that the IR utility for a firm in terms of cost of debt decreases with increasing ESG performance, but reveal that IR is also beneficial for firms with high ESG performances (up to an ESG score of 96.6). This threshold might be attributable to preparation costs and cost–benefit considerations of IR (Cortesi & Vena, 2019; Lee & Yeo, 2016). Subsequent moderation analyses further reveal that firms that belong to an environmentally sensitive industry pay an interest premium, but are able to more than compensate for this penalty interest through IR.…”