The Impact of Integrated Reporting on Analysts’ Forecasts

Bakker, Romy S.; Γεωργακόπουλος, Γεώργιος; Sotiropoulou, Virginia; Τούντας, Κανέλλος

doi:10.5539/ijef.v12n1p76

Cited by 5 publications

(2 citation statements)

References 27 publications

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“…Bissessur and Veenman ( 2016) attribute analysts forecast errors to uncertainty about firms' prospects. Bakker et al (2020) found a significant negative relationship between mandatory IR and analysts forecast errors. Such findings suggest that financial analysts do not only rely on conventional financial statements but also consider nonfinancial disclosures.…”

Section: Analysts' Forecast Errorsmentioning

confidence: 91%

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Effects of integrated reporting on the cost of capital and analysts’ forecasts errors: A study of Johannesburg Stock Exchange listed mining firms

Ngcobo

Sibanda

2021

J. econ. financ. sci.

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Orientation: Integrated reporting (IR) has gained traction over the last decade. Although IR became mandatory for all firms listed on Johannesburg Stock Exchange (JSE) in 2010, the International Integrated Reporting Council (IIRC) issued the IR framework in December 2013.Research Purpose: The study seeks to investigate the effects of IR on the cost of equity capital and analysts’ forecast errors for the mining firms listed on JSE.Motivation for the study: A large part of empirical evidence highlights benefits of IR; however, some studies still find no link between the quality of integrated reports and economic benefits for the reporting firm. It is against this backdrop that the study investigates effects of integrated reports on the cost of equity capital and analysts’ forecast errors.Research approach, design and method: We use a quantitative research design to test effects of IR on the cost of equity capital and analysts’ forecast errors. We study used a panel regression to analyse relationship amongst IR, cost of equity capital and analysts’ forecast errors.Main findings: The study found a significant negative relationship between IR scores and cost of equity and analysts’ forecast errors.Practical or managerial application: The findings of the study could incentivise managers in other jurisdictions where IR is not mandatory. Furthermore, findings may contribute to the existing discourse on firm-based benefits related to the quality of IR.Contribution or value addition: The study contributes to the body of knowledge with regard to possible benefits associated with compliance with the IR reporting framework.

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Section: Analysts' Forecast Errorsmentioning

confidence: 91%

“…We collected data for FCERROR from Bloomberg and McGregor BFA Library databases. Adapted from Bissessur and Veenman (2016), Zhou et al (2017) and Bakker et al (2020), the formula for analysts forecast errors is presented as follows:…”

Section: Analysts' Forecast Errorsmentioning

confidence: 99%

Effects of integrated reporting on the cost of capital and analysts’ forecasts errors: A study of Johannesburg Stock Exchange listed mining firms

Ngcobo

Sibanda

2021

J. econ. financ. sci.

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Capital market effects of integrated reporting quality: evidence from South African context

Boujelben,

Hadriche,

Makni Fourati

2024

JFRA

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Purpose The purpose of this study is to examine the interplay between integrated reporting quality (IRQ) and capital markets. More specifically, the authors test the impact of IRQ on stock liquidity, cost of capital and analyst forecast accuracy. Design/methodology/approach The sample consists of listed firms on the Johannesburg Stock Exchange in South Africa, covering the period from 2012 to 2020. The IRQ measure used in this study is based on data from Ernst and Young. To test the proposed hypotheses, the authors conducted a generalized least squares regression analysis. Findings The empirical results evince a positive relationship between IRQ and stock liquidity. However, the authors did not find a significant effect of IRQ on the cost of capital and financial analysts’ forecast accuracy. In robustness tests, it was shown that firms with a higher IRQ score exhibit higher liquidity and improved analyst forecast accuracy. Additional analysis indicates a negative association between IRQ and the cost of capital, as well as a positive association between IRQ and financial analyst forecast accuracy for firms with higher IRQ scores (TOP ten, Excellent, Good). Originality/value The study stands as one of the initial endeavors to investigate the impact of IRQ on the capital market. It provides valuable insights for managers and policymakers who are interested in enhancing disclosure practices within the financial market. Furthermore, these findings are significant for investors as they make informed investment decisions.

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Integrated Reporting and the Informativeness of Financial Analysts’ Stock Recommendations

Baboukardos,

Kopita

2024

Int. J. Acc.

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Synopsis The research problem The purpose of this study was to examine the market reaction to sell-side analyst recommendation revisions issued under an integrated reporting (IR) approach. Motivation Advocates of this corporate reporting approach argue that IR enhances capital markets’ information environment by rendering investors better able to assess the value creation process of a firm. Recent empirical studies corroborate this argument. Considering the central role of financial intermediaries, we investigated whether the informativeness of analyst recommendation revisions is associated with the adoption of IR and the quality of integrated reports. The test hypotheses We tested whether the informativeness of analyst recommendation revisions decreases or increases after the mandatory adoption of an IR approach. Furthermore, we tested whether the informativeness is negatively or positively related to the quality of the released integrated report after the mandatory adoption of an IR approach. Target population We focused on the South African capital market, which is the only setting where IR is mandated. We utilized a sample of 3,201 recommendation revisions made within a 3-year window around the mandatory IR adoption. Adopted methodology This study used ordinary least square (OLS) regressions and applied difference-in-differences as well as instrumental variable approaches. Analyses We modeled the market reaction to the recommendation revisions as a function of the period in which the recommendations are announced (i.e., pre- or post-adoption), along with other factors affecting market reaction. In subsequent tests, we also modeled the market reaction to the recommendation revisions as a function of the quality of a firm’s integrated report. Findings We found strong evidence that analysts’ revisions exhibited economically and statistically significantly lower information content under IR. Moreover, we found that upgrades and downgrades issued in the post-adoption period were less informative when issued for firms with high-quality integrated reports. Overall, results showed that the benefit of acquiring advice from analysts became more marginal under an IR approach.

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The Impact of Integrated Reporting on Analysts’ Forecasts

Cited by 5 publications

References 27 publications

Effects of integrated reporting on the cost of capital and analysts’ forecasts errors: A study of Johannesburg Stock Exchange listed mining firms

Effects of integrated reporting on the cost of capital and analysts’ forecasts errors: A study of Johannesburg Stock Exchange listed mining firms

Capital market effects of integrated reporting quality: evidence from South African context

Integrated Reporting and the Informativeness of Financial Analysts’ Stock Recommendations

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