Mediating impact of integrated reporting on audit quality and market reactions in Africa: evidence from South Africa
ISSN: 1030-9616
Article publication date: 5 July 2024
Issue publication date: 6 August 2024
Abstract
Purpose
The purpose of this study is to investigate the mediating impact of integrated reporting on the relationship between audit quality and market reactions in Africa using South Africa as a sample.
Design/methodology/approach
The study sample size consists of 119 firms listed on the Johannesburg Stock Exchange. The study was carried out for the period 2011–2019. Market reactions were proxy by share price and adjusted market returns. The authors controlled for the effects of market reactions by using other firm specifics like operating income, assets, leverage and return on assets and thereafter carried out robustness checks included under additional analysis.
Findings
Results from the study showed that integrated reporting partially mediates the relationship between audit quality and market reactions. Moreover, audit quality has a positive significant impact on market reactions in the form of the share price. The results were obtained in addition to a robustness check using adjusted market returns as a proxy for market reactions.
Practical implications
Regulators and standard setters in other countries should make integrated reporting mandatory. This study not only informs the public and investors about the organization’s business performance but also reveals auditor assurances that enchase market confidence in the company.
Social implications
Exploring the mediating impact of integrated reporting on the relationship between audit quality and market reactions yields valuable insights. Integrated reporting, which combines financial and non-financial information, influences how investors perceive and react to audit quality. Understanding this interplay could shed light on the broader implications for corporate transparency and accountability.
Originality/value
The authors are the first to conduct such a study in an emerging economy. Hence, the authors used integrated reporting as a new variable in the study of audit quality and market reactions. Furthermore, the authors used adjusted market returns under robustness checks to check if audit quality has an impact on market reactions.
Keywords
Acknowledgements
The authors acknowledge the Dongbei University Finance and economics for giving them the platform and good environment to enable them to study and carry out this research.
Funding: The authors received no funding for this research, and thus, it not applicable.
Author contribution: All authors listed here in contributed greatly to the carrying out of research, with Professor Chen Yan providing valuable guidance and directions, Frederik and Amon combining to write, do data analysis and the rest of the article.
Ethical informed: The manuscript has not been submitted to another journal for simultaneous consideration, is original, has not been published anywhere else in any form or language, results are presented honestly, clearly, without fabrication and authors adhered to discipline-specific rules for acquiring, selecting and processing data.
Conflict of interest: The authors have no conflict of interests to declare.
Data availability statement: Data used in the study was got and is available on individual company websites in form of annual reports. Processed data is available with the corresponding author upon request.
Citation
Bagonza, A., Chen, Y. and Rech, F. (2024), "Mediating impact of integrated reporting on audit quality and market reactions in Africa: evidence from South Africa", Accounting Research Journal, Vol. 37 No. 4, pp. 401-417. https://doi.org/10.1108/ARJ-01-2023-0009
Publisher
:Emerald Publishing Limited
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