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Integrated reporting (IR) aims to provide disclosures of the connectivity of non-financial and financial value creation aspects. These disclosures are defined as the…
Integrated reporting (IR) aims to provide disclosures of the connectivity of non-financial and financial value creation aspects. These disclosures are defined as the disclosed connectivity of the capitals resulting from integrated thinking. This paper aims to investigate the extent of disclosed connectivity of the capitals in integrated reports and its underlying managerial discretion by drawing on economic-based theories.
Regression analyses are applied to examine the associations between economic firm-level characteristics and the extent of disclosed connectivity of the capitals. The analyses are based on a content analysis of 169 integrated reports disclosed in 2013 and 2014 by Forbes Global 2000 companies.
This paper finds high heterogeneity in the extent of disclosed connectivity of the capitals in current IR practice. This heterogeneity is related to drivers arising from economic-based theories. Firms’ non-financial and financial performance and the importance of strategic shareholders and debt providers are positively associated with the extent of disclosed connectivity of the capitals. The complexity of the business model and a highly competitive environment are negatively associated with the extent of disclosed connectivity of the capitals.
This paper extends qualitative IR studies on the disclosed connectivity of the capitals by quantitative results from a content analysis for a cross-sectional and global sample. Additionally, this study adds to prior IR literature on the drivers of the binary decision to disclose an integrated report by focusing on the extent of disclosed connectivity of the capitals.
For report preparers, users and standard setters, the results reveal that perceived cost-benefit considerations (signaling vs. direct and proprietary costs) may explain managerial discretion regarding the connectivity of the capitals within integrated reports.
This paper examines integrated reports, which are intended to inform providers of financial capital and other stakeholders about the connectivity of the six capitals of the IR framework.
This paper develops a metric disclosure measure of the extent of disclosed connectivity of the capitals. It provides initial evidence of how the IR framework’s focus on this key characteristic is realized in disclosure practice. Concerns about competitive disadvantages and preparation costs limit this key characteristic of integrated reports.
The usefulness of risk disclosures (RDs) to support equity investors’ investment decisions is highly discussed. As prior research criticizes the extensive aggregation of…
The usefulness of risk disclosures (RDs) to support equity investors’ investment decisions is highly discussed. As prior research criticizes the extensive aggregation of risk information in existing empirical research, this paper aims to provide an attempt to identify disaggregated risk information associated with cumulative abnormal stock returns (CARs).
The sample consists of 2,558 RDs of companies listed in the S&P 500 index. The RDs were filed within 10 K filings between 2011 and 2017. First, this study automatically extracted 35,685 key phrases that occurred in a maximum of 1.5% of the RDs. Second, this study performed stepwise regressions of these key phrases and identified 67 (78) key phrases that show positive (negative) associations with CARs.
The paper finds that investors seem to value most the more common key phrases just below the 1.5% rarest key phrase threshold and business-related key phrases from RDs. Furthermore, investors seem to perceive key phrases that contain words indicating uncertainty (impacts) as a negative (positive) rather than a positive (negative) signal.
The research approach faces limitations mainly due to the selection of the included key phrases, the focus on CARs and the methodological choice of the stepwise regression analysis.
The study reveals the potential for companies to increase the information value of their RDs for equity investors by providing tailored information within RDs instead of universal phrases. In addition, the research indicates that the tailored RDs encouraged by the SEC contain relevant information for investors. Furthermore, the results may guide the attention of equity investors to relevant text passages whose deeper analysis might be useful with regard to investors’ capital market decisions.
This paper aims to unite firm- and country-level drivers of the disclosure of integrated reports. It creates a synopsis of voluntary disclosure, signaling, proprietary…
This paper aims to unite firm- and country-level drivers of the disclosure of integrated reports. It creates a synopsis of voluntary disclosure, signaling, proprietary cost, legitimacy, stakeholder and institutional theory.
The empirical analyses build on a logistic regression model examining the disclosure decisions for integrated reports published between 2012 and 2016 by the 2,000 largest listed companies worldwide.
The results indicate that the disclosure of integrated reports by large listed companies is explained in parallel by multiple theories, operationalized by the firm-level characteristics of lower profitability, a higher market-to-book value, lower leverage, lower level of industry concentration and higher social performance. Additionally, the country-level characteristics of civil law setting and lower investor protection, lower power distance and lower masculinity coincide with the disclosure of integrated reports.
The inferences emphasize that a single theoretical framework cannot explain the decision to disclose an integrated report. Rather, a set of economic firm characteristics may lead to different disclosure decisions in different socio-economic and institutional environments.