The diffusion and adoption of integrated reporting: a cross-country analysis on the determinants
ISSN: 2049-372X
Article publication date: 18 January 2021
Issue publication date: 20 January 2022
Abstract
Purpose
This study aims to provide empirical evidence on the determinants of voluntary integrated reporting (<IR>) disclosure quality.
Design/methodology/approach
The samples include companies from the Integrated Reporting Examples Database on the International Integrated Reporting Committee’s (IIRC) website, except South Africa and Brazil, where reporting is mandatory. The final sample includes 29 countries, with 148 companies and 592 observations for the study period 2014–2017. Content analysis is used to measure <IR> disclosure quality derived from the <IR> principles and elements published by IIRC (2013). The fraction regression probit model is used to test the proposed hypothesis.
Findings
This study provides empirical evidence that competition from new entrants and country-level accounting competence encourage companies to implement the International Integrated Reporting Framework (IIRF). Signaling theory and diffusion of innovation theory can be used to explain this association. Meanwhile, product market competition of existing rivals has been found to reduce the adoption of the <IR> framework, which is consistent with the proprietary cost theory. Finally, this study finds that company reputation does not affect voluntary <IR> disclosure quality.
Research limitations/implications
This study did not examine the barriers to entry to explain the effect of competition from new entrants as a possible determinant of <IR> disclosure quality. Furthermore, the inclusion of <IR> in the accounting curriculum of universities and certification bodies in certain countries has not been considered as a control variable. The results might also be limited to companies that voluntarily submitted into the Integrated Reporting Examples Database on the IIRC website. All these limitations provide ample avenues for future research.
Practical implications
This research provides implications for governments and standard setters to further sharpen the competence of accountants through memberships in professional accountancy organisations or through training and seminars related to <IR>. The results also suggest that universities should include the topic of <IR> in the accounting program curriculum to increase the understanding of prospective accountants about this reporting regime. The results also show differences on the impact of competition between new entrants and existing rivals on <IR> disclosure quality. This can be used by IIRC or other standard setters to predict the <IR adoption>.
Originality/value
This study uses the diffusion of innovation theory to explain the association between country-level accounting competence and <IR> disclosure quality. Few studies have researched this association. The results show that a country’s accounting competence increases the application of the IIRF in corporate reporting. <IR> has been considered an innovation in corporate reporting and can be implemented by the company if its professional accountants have enough knowledge of this reporting framework.
Keywords
Acknowledgements
The authors greatly appreciated the fundings from Hibah PITMA A 2019, Universitas Indonesia. We also thank the editor and anonymous reviewers of this journal, as well as our fellow academicians at Universitas Indonesia for the constructive comments and feedback.
Citation
Oktorina, M., Siregar, S.V., Adhariani, D. and Mita, A.F. (2022), "The diffusion and adoption of integrated reporting: a cross-country analysis on the determinants", Meditari Accountancy Research, Vol. 30 No. 1, pp. 39-73. https://doi.org/10.1108/MEDAR-12-2019-0660
Publisher
:Emerald Publishing Limited
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