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Stock market reactions to voluntary integrated reporting

Yuzuka Nakajima (International Christian University, Mitaka, Japan)
Yushi Inaba (International Christian University, Mitaka, Japan)

Journal of Financial Reporting and Accounting

ISSN: 1985-2517

Article publication date: 12 July 2021

Issue publication date: 12 July 2022

814

Abstract

Purpose

This study aims to examine the impact of voluntary adoption of integrated reporting on the stock prices of firms in Japan.

Design/methodology/approach

The event study methodology was used to analyze the stock market reactions to voluntary integrated report (IR) publication. Abnormal returns were estimated for 1,602 observations of 490 firms publishing IRs in Japan using the market model. The t-test, the Boehmer et al., 1991 test and the generalized sign test examined the significance of the cumulative average abnormal returns (CAARs).

Findings

The study reveals that the stock market reacts positively to voluntary IR publication by firms, especially in 2019 and 2015. Additionally, it reveals a tendency for higher CAARs around IR publication dates than around corporate social responsibility report publication dates, especially in 2016 and 2015.

Research limitations/implications

The limitations of this study include the possibility of self-selection bias and omitted variable bias.

Practical implications

This study suggests that firms can earn higher abnormal returns in the stock market through environmental, social and governance (ESG) disclosure in IRs, corroborating the recently rising investor interest in voluntary integrated reporting in Japan.

Originality/value

This study contributes to the literature on the value relevance of voluntary adoption of integrated reporting by providing evidence of firms achieving significantly positive abnormal returns around voluntary IR publication dates. There is no published analysis on this topic using multitudes of sample firms using the event study methodology.

Keywords

Acknowledgements

The authors thank the anonymous reviewers for their carefull reading of this manuscript and their insightful comments and suggestions. Funding One of the authors (Yushi Inaba) disclosed receipt of the following financial support for the research, authorship, and/or publication of this article: This work was supported by JSPS KAKENHI (Grant-in-Aid for Scientific Research(C): Grant Number JP18K01763).

Citation

Nakajima, Y. and Inaba, Y. (2022), "Stock market reactions to voluntary integrated reporting", Journal of Financial Reporting and Accounting, Vol. 20 No. 3/4, pp. 516-541. https://doi.org/10.1108/JFRA-07-2020-0217

Publisher

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Emerald Publishing Limited

Copyright © 2021, Emerald Publishing Limited

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