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

Abstract

This paper examines the relationship between the level of integrated reporting (IR) based on the extent of adoption of the International Integrated Reporting Framework (IIRF) and the firm value (a proxy for value relevance of IR) in Sri Lanka, where the adoption of IR is a voluntary exercise. Using a comprehensive disclosure checklist, 117 integrated reports were content-analyzed, and then two regression models assessed the value relevance of IR disclosure. The study notes an increasing trend toward the adoption of IIRF in the preparation of integrated reports overall, as well as of each content element of IIRF. However, this rising trend has not significantly impacted the firm value by itself. Hence, this study’s findings do not support the enlightened stakeholder’s view on the subject of IR in Sri Lanka. Instead, it shows a significant positive relationship with the firm value when combined with the information on earnings (earnings per share), indicating that IIRF-compliant IR improves the value relevance of accounting information. This study offers insights for policymakers, professional accounting bodies, and practitioners on how investors make use of the information disclosed in integrated reports in their decision-making.

Adoption of integrated reporting in Sri Lanka: coverage and trend

“…Intending to identify the coverage of and trends in IR in Sri Lanka over a period of time, the study selected all the companies listed on the Colombo Stock Exchange for the financial JFRA 20,3/4 years ranging from 2015/2016 to 2017/2018. The annual reports for the analysis were selected from 2015 [2], as previous scholars such as Cooray et al (2020b) and Gunarathne and Senaratne (2017) confirmed that Sri Lanka had experienced a significant increase in the number of IR adopters since 2015. To maintain consistency and comparability, the companies that had prepared an integrated report throughout the three years were selected for the analysis.…”

Systematic review of integrated reporting: recent trend and future research agenda

“…Moderating and mediating variables included in prior researchThree studies(Omran et al, 2020;Landau et al, 2020;Cooray et al, 2020a) examine the contingent factors that interact with <IR>. This accounts for 18% of the sample studies (Table…”

Exploring the Rationale for Assuring Integrated Reports and its Impacts on Assurance Practices: A Proposed Conceptual Model

“…IR entails a new and innovative approach to current corporate reporting practices (Adams & Simnett, 2011;Nicolo et al, 2020). It combines the most material financial and non-financial information currently reported in separate reporting strands into a coherent whole (i.e., through an integrated report) and explains how they affect the ability of an organisation to create and sustain value in the short, medium, and long terms (Cooray et al, 2020;IIRC, 2011;Tlili et al, 2019). Thus, IR aims to develop a holistic corporate-reporting model (Camodeca et al, 2018;Eccles & Krzus, 2010) which depicts inter-connectivity between a firm's strategies and performance and the economic, social and environmental contexts within which it operates.…”