Firm characteristics and excellence in integrated reporting

Abstract

Background: Integrated reporting has attracted much attention in the past few years, and South Africa has taken the lead in its development worldwide. An annual survey is published by Ernst & Young regarding the quality of the integrated reports of the top 100 entities listed on the Johannesburg Stock Exchange (JSE).Aim: The study on which this article is based was aimed at determining whether the assessment of an entity’s characteristics can predetermine the quality of the integrated report generated by that entity. Setting: This article focuses on an analysis of the integrated reporting of the top 100 entities listed on JSE for the financial years ending in 2013, 2014 and 2015.Methods: Comparison of categorical variables, mixed-model repeated measures ANOVA and generalised estimating equations were applied to identify the best classificators to distinguish between excellent integrated reporting and those reports where progress could still be made. Results: The results show that the type of industry the entity finds itself in, the size and profitability of the entity, as well as the composition of the members of the board, have an effect on the quality of the integrated report.Conclusion: Our results indicated that the type of industry, size of an entity, the profitability and composition of the board of directors, all have an effect on the quality of the integrated reporting. Our evidence will assist current and prospective stakeholders in evaluating the expected quality of an entity’s integrated report, through the evaluation of certain firm characteristics.

Determinants of Companies that Disclose High-Quality Integrated Reports

“…Similarly, in a recent research study on integrated reporting, it was found that the majority of integrated reporters are from Europe [52]. In South Africa, perhaps also due to the requirement for IR at the JSE, it was found that companies are more likely to produce an integrated report than in other countries [33,38,43]. For South African organizations, since the introduction of integrated reporting, the disclosure of social and relationship, human, natural, and intellectual capital has increased significantly for listed companies [41].…”

“…Many of the previous studies on voluntary information disclosure have focused on various kinds of voluntary information disclosure such as sustainability reporting or environmental reporting. Some looked into determinants of voluntary disclosure in particular countries or regions [26][27][28][29][30][31][32][33]. Others examined the relationship between certain characteristics in connection with voluntary information disclosure [34][35][36][37].…”

Integrated reporting and financial performance of South African listed banks

“…This is different from the studies in the literature, which suffer from the following flaws. Firstly, they either used third party assessments of integrated reporting (Buitendag, Fortuin, & De Laan, 2017; Du Toit, 2017). Secondly, they merely assessed the companies' performance without using the mandatory introduction of integrated reporting as an exogenous shock to the company's financial performance (Baboukardos & Rimmel, 2016).…”

The readability of integrated reports

“…Corporate value and reputation can be affected by corporate reporting (Hrasky & Smith, 2008), therefore information beyond the financial statements is required for stakeholders to accurately gauge how companies are creating or destroying value (Buitendag et al, 2017;De Villiers & Sharma, 2017;De Villiers & van Staden, 2010b;Flower, 2015;Krzus, 2011b;Phillips et al, 2011;Rahman, 2014;Setia et al, 2015;Wee et al, 2016;Zhou, Simnett, & Green, 2017). Roberts (2011) claims that a focus on the interests and expectations of all stakeholders is bound to be in the best interest of the company as a whole.…”

“…One of the key characteristics of a good report is its ability to convey the necessary information to its wide audience in a way that is easy to read and understand and is appropriate for decision-making (Buitendag, Fortuin, & de Laan, 2017;Chatterjee, 2008;Cook & Sutton, 1995;Eugene Baker III & Kare, 1992;Jones, 1988;Pashalian & Crissy, 1952;Rahman, 2014;Richards & van Staden, 2015). Unfortunately, many studies have found that financial reports are lacking in readability (Anderson, 1998;Bartlett & Chandler, 1997;Hrasky & Smith, 2008;Schroeder & Gibson, 1992), in part as a result of increasing complexity (Eccles & Saltzman, necessarily read corporate reports nor find them useful, which could be a function of reports being difficult to read.…”