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Does environmental, social and governance performance influence intellectual capital disclosure tone in integrated reporting?

Valentina Beretta (Department of Economics and Management, University of Pavia , Pavia, Italy)
Chiara Demartini (Department of Economics and Management, University of Pavia , Pavia, Italy)
Sara Trucco ( Università degli Studi Internazionali di Roma , Rome, Italy)

Journal of Intellectual Capital

ISSN: 1469-1930

Article publication date: 7 December 2018

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Abstract

Purpose

The integrated reporting framework seeks to connect a firm’s financial and non-financial performance in a single report by displaying how different forms of capital contribute to the firm’s value creation. Drawing on impression management and incremental information approaches, the purpose of this paper is to examine how the content and semantic properties of intellectual capital disclosure (ICD) found in integrated reports is associated with firms’ performance.

Design/methodology/approach

All reports by European listed firms from 2011 to 2016 available via the integrated reporting emerging practice examples database are analysed. Content analysis is used to assesses the quality of ICDs, whereas a regression analysis tests the variation in semantic properties of ICDs according to firms’ performance.

Findings

ICDs in integrated reports are mainly discursive, with a backward looking orientation and a limited focus on human capital. On average, more than half of each ICD is conveyed in a positive tone. As the optimistic tone in firms’ ICDs increases, so too does their non-financial performance measured in terms of environmental, social and governance aspects. This finding supports the incremental information approach.

Originality/value

This paper contributes to the current literature on ICDs by introducing new evidence on firms’ motivations for non-financial disclosures in integrated reports. By taking a more comprehensive theoretical approach, namely, testing both impression management and incremental information hypotheses, this research extends on prior studies which tested similar relationships in integrated reports but focussed only on the impression management hypothesis.

Keywords

Acknowledgements

The authors would like to thank the anonymous reviewers, the Guest Editors, Subhash Abhayawansa, James Guthrie and Cristiana Bernardi, for their useful comments. The authors are also responsible for the findings, recommendations and errors of the manuscript.

Citation

Beretta, V., Demartini, C. and Trucco, S. (2019), "Does environmental, social and governance performance influence intellectual capital disclosure tone in integrated reporting?", Journal of Intellectual Capital, Vol. 20 No. 1, pp. 100-124. https://doi.org/10.1108/JIC-02-2018-0049

Publisher

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Emerald Publishing Limited

Copyright © 2018, Emerald Publishing Limited