Assurance quality, disclosed connectivity of the capitals and information asymmetry – An interaction analysis for the case of integrated reporting
ISSN: 2049-372X
Article publication date: 19 October 2021
Issue publication date: 26 May 2022
Abstract
Purpose
Credibility concerns regarding integrated reports can harm the intended decrease of information asymmetry between a firm and its investors. Therefore, it is crucial to examine whether voluntary third-party assurance enhances the credibility of integrated reports and, thus, decreases information asymmetry. Furthermore, this study aims to investigate the interaction effect between assurance quality and the disclosed connectivity of the capitals, a distinguishing feature of integrated reports.
Design/methodology/approach
Content analysis is performed of the 176 assurance statements included in the 269 integrated reports of Forbes Global 2000 firms disclosed from 2013 to 2015 and the 269 integrated reports themselves. Regression analyzes are applied to examine the associations between assurance, the disclosed connectivity of the capitals and information asymmetry.
Findings
The presence of an assurance statement in an integrated report significantly decreases information asymmetry. Surprisingly, assurance quality is not significantly associated with information asymmetry. However, an interaction analysis reveals that combining high assurance quality with high disclosed connectivity of the capitals allows a significant decrease in information asymmetry.
Research limitations/implications
The paper demonstrates that the connectivity of the capitals of integrated reports and assurance quality are connected and together are associated with information asymmetry.
Practical implications
The results imply, both for report preparers and standard setters, that assurance quality is advantageous only when combined with disclosed connectivity of the capitals.
Social implications
More information on non-financial information measured by the connectivity of the capitals of integrated reporting has an interaction effect together with assurance quality on information asymmetry.
Originality/value
This paper builds on a unique data set derived from the contents of integrated reports and accompanying assurance statements. Furthermore, it extends the integrated reporting literature by investigating the interaction between assurance quality and the disclosed connectivity of the capitals, which had not previously been examined in combination.
Keywords
Acknowledgements
The authors gratefully acknowledge the highly valuable comments and suggestions of Michael Dobler, John Dumay, Joachim Gassen, Axel Haller, Gaia Melloni, Deborah Nagel, and Remmer Sassen. The authors also appreciate the suggestions of the participants of the 1st Swiss Accounting Research Alpine Camp in Champéry, Switzerland 2018, the 41st Annual Congresses of the European Accounting Association in Milan, Italy 2018, the VHB Quantitative Empirical Accounting Research Seminar in Berlin, Germany 2018, the 14th Interdisciplinary Conference on Intangibles and Intellectual Capital – Value Creation, Integrated Reporting and Governance in Munich, Germany 2018, and the 7th Annual Conference on Risk Governance in Siegen, Germany 2019. Furthermore, they thank Fabian Droese for his research assistance during the data collection.
Citation
Grassmann, M., Fuhrmann, S. and Guenther, T.W. (2022), "Assurance quality, disclosed connectivity of the capitals and information asymmetry – An interaction analysis for the case of integrated reporting", Meditari Accountancy Research, Vol. 30 No. 3, pp. 852-892. https://doi.org/10.1108/MEDAR-11-2020-1087
Publisher
:Emerald Publishing Limited
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