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Article
Publication date: 21 September 2020

Mutalib Anifowose, Salihin Abang and Muntaka Alhaji Zakari

This paper examines the going concern of integrated reporting <IR> as the pessimistic about its sustainable value relevance is gaining momentous. The study employs a…

Abstract

Purpose

This paper examines the going concern of integrated reporting <IR> as the pessimistic about its sustainable value relevance is gaining momentous. The study employs a quantitative approach to data analysis and mainly sourced secondary data from integrated reports of 83 sampled companies.

Design/methodology/approach

Utilising data from the companies' integrated reports from 2015 to 2018, the study analyses the impact of <IR> capitals disclosure on corporate sustainable value. <IR> was proxied by its six capital elements, which include financial, manufactured, human, intellectual, natural and social, and relationship capitals, while sustainable value was surrogated by the cost of financing and revenue growth rate. The study develops a checklist and utilises content analysis to score the quality of disclosure by sample companies during the period.

Findings

The longitudinal panel data analysis results reveal that on overall disclosure, <IR> capital has a significant positive effect on the revenue growth but fails to document such on the cost of financing. Meanwhile, on the individual level, human capital and natural capital disclosure have an indirect effect on the cost of financing, while all the six subclassifications affect the revenue growth of the sampled companies.

Research limitations/implications

The study sampled only 83 companies across the region due to the limited availability of data. Therefore, the generalisation of findings might be hindered, and further examination might be considered as more data become available.

Practical implications

The study would support the regulators in developing countries to monitor <IR> practices for their domestic companies. It would assist the International Integrated Reporting Council (IIRC) to review the industry's current <IR> practices and give the reason for better <IR> implementation in the future, from both minority and majority economies.

Originality/value

The study is among the pioneer studies that would consider <IR> research across the Asian continent. The study contributes to the recent discussion about sustainable value relevance of <IR>. Also, it would provide some level of incentive to those charged with governance concerning the voluntary compliance with the <IR> framework.

Details

Asian Review of Accounting, vol. 28 no. 4
Type: Research Article
ISSN: 1321-7348

Keywords

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Article
Publication date: 10 April 2017

Abdifatah Ahmed Haji and Mutalib Anifowose

The purpose of this paper is to explore the implications of IR reforms in South Africa on corporate disclosure practices of South African companies. In particular, the…

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Abstract

Purpose

The purpose of this paper is to explore the implications of IR reforms in South Africa on corporate disclosure practices of South African companies. In particular, the authors explore initial trends in corporate disclosures following the adoption of IR practice.

Design/methodology/approach

Drawing from Suchman’s (1995) framework of strategic and institutional legitimacy, the authors use content analysis to examine corporate disclosure practices. The authors conduct industry-specific analyses based on various industries to explore corporate disclosures practices across and within various industries in South Africa. The evidence is drawn from 246 integrated reports of large South African companies across six major industries over a three-year period (2011-2013), a period following the introduction of an “apply or explain” IR requirement in South Africa.

Findings

The results first show a significant increase in the overall amount of corporate disclosures following the adoption of IR practice. In particular, the authors find that intellectual capital and human capital disclosure categories have increased over time, with relational capital disclosures showing a decreasing trend. Second, the authors find that corporate disclosures are increasingly becoming institutionalised over time across and within industries following the adoption of IR practice. However, companies fail to provide meaningful disclosures on the interdependencies and trade-offs between the capitals, or components of a capital following the adoption of IR practice. Overall, the authors find that companies use specific disclosure strategies to respond to external pressures (strategic legitimacy), and that such disclosure strategies are increasingly becoming institutionalised across and within various industries (institutional legitimacy).

Practical implications

The theoretical implication of this study is that the strategic and institutional perspectives of legitimacy theory are complementary, rather than conflicting, and dovetail to explain corporate reporting practices. In terms of practical implications, the adoption of specific reporting frameworks such as the emerging IR framework is a double-edged sword. On the one hand, such reporting frameworks could potentially enhance comparability and consistency of organisational reports across and within industries. On the other hand, corporate reports could become a set of monotonous reports motivated by considerations other organisational accountability. Hence, to overcome the latter, this study emphasises the importance of specific accountability metrics and reporting guidelines, rather than the current generic IR guidelines, to enhance organisational reporting practices.

Originality/value

The paper’s longitudinal analysis of a large sample of integrated reports following the adoption of IR practice has the potential to inform growing academic research and ongoing policy initiatives for the emerging IR agenda.

Details

Journal of Intellectual Capital, vol. 18 no. 2
Type: Research Article
ISSN: 1469-1930

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Article
Publication date: 14 August 2017

Mutalib Anifowose, Hafiz Majdi Abdul Rashid and Hairul Azlan Annuar

The purpose of this paper is to examine the relationship between IC disclosure and the corporate market value (CMV) of listed firms on the main board of Nigeria Stock…

Abstract

Purpose

The purpose of this paper is to examine the relationship between IC disclosure and the corporate market value (CMV) of listed firms on the main board of Nigeria Stock Exchange and to test the moderating effect of religious and ethnic composition of board members on the relationship.

Design/methodology/approach

This study applies the signaling and upper echelons theories in formulating four hypotheses that guide the results analysis. By employing a two-step dynamic system generalized method of moments and controlling for the possible endogeneity effect on the parameters estimated for a sample of 91 listed firms on main board of Nigeria Stock Exchange, this study investigates the association of IC disclosure with CMV, namely, cost of capital and market capitalization, and the moderating role of religious and ethnic composition on such association using data over the 2010 to 2014 financial years.

Findings

The results show a significant positive relationship between overall IC disclosure and market capitalization and a negative impact on cost of capital, which are in line with the hypothesized propositions. The moderating effect of board diversity is also confirmed. This study contributes to recent evidence concerning the value relevance of IC information to investors and other interested stakeholders and the established moderating role of board diversity in IC disclosure-related studies.

Practical implications

The regulators may consider development of standards on board composition about religious and ethnic composition in order to curb the domination from same group in the board room. Those charged with governance should be concerned with the disclosure of IC information in the financial statements as it has value relevance to the investors, in line with signaling theory.

Social implications

The ethnic and religious composition of board members is a significant factor within the board room and needs to be given adequate consideration.

Originality/value

This study is the first to consider IC disclosure across whole sectors in the Nigerian economy and looks upon ethnicity and religious affiliation of boards as moderating variables. The study controls for heteroscedasticity and endogeneity issues by adopting two-step dynamic system generalized method of moments.

Details

Journal of Accounting in Emerging Economies, vol. 7 no. 3
Type: Research Article
ISSN: 2042-1168

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Article
Publication date: 14 May 2018

Mutalib Anifowose, Hafiz Majdi Abdul Rashid, Hairul Azlan Annuar and Hassan Ibrahim

The purpose of this paper is to examine the value relevance of intellectual capital (IC) by analysing the relationship between IC efficiency (ICE) and corporate book value…

Abstract

Purpose

The purpose of this paper is to examine the value relevance of intellectual capital (IC) by analysing the relationship between IC efficiency (ICE) and corporate book value of listed firms on main board of Nigeria Stock Exchange.

Design/methodology/approach

This study applies the resource-based theory in formulating two hypotheses that guide the results analysis. By employing a two-step dynamic system generalised method of moments (GMMs), and controlling for the possible endogeneity effect on the parameters estimated, for a sample of 91 listed firms on main board of Nigeria Stock Exchange, this study investigates the association of ICE and corporate book value, namely, cash flow from operation and economic value added (EVA), using data over the 2010 to 2014 financial years.

Findings

The results show a significant positive relationship between overall ICE and corporate book value (cash flow from operation and EVA). This study contributes to recent evidence concerning the value relevance of IC information to investors and other interested stakeholders.

Research limitations/implications

The generalisation of the results to smaller firms, in the alternative securities market, may be inappropriate as study sampled listed firms on the main board of Nigerian Stock Exchange.

Practical implications

Those charged with governance should be concerned with the investment and management of IC as it enhances the economic value and operating cash flow in line with the resource-based theory.

Originality/value

This study is first to consider the ICE study across all sectors in the Nigerian economy using modified Pulic value added intellectual capital. The study controls for heteroscedasticity and endogeneity issues by adoption of two-step dynamic system GMMs.

Details

Journal of Intellectual Capital, vol. 19 no. 3
Type: Research Article
ISSN: 1469-1930

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Article
Publication date: 3 May 2016

Abdifatah Ahmed Haji and Mutalib Anifowose

The purpose of this paper is to examine the trend of integrated reporting (IR) practice following the introduction of an “apply or explain” IR requirement in South Africa…

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3267

Abstract

Purpose

The purpose of this paper is to examine the trend of integrated reporting (IR) practice following the introduction of an “apply or explain” IR requirement in South Africa. In particular, the authors examine whether the IR practice is ceremonial or substantive in the context of a soft regulatory environment.

Design/methodology/approach

By way of content analyses, the authors examine the extent and quality of IR practice using an IR checklist developed based on normative understanding of existing IR guidelines. The evidence is drawn from 246 integrated reports of large South African companies over a three-year period (2011-2013), following the introduction of IR requirement in South Africa.

Findings

The results show a significant increase in the extent and quality of IR practice. The findings also reveal significant improvements in individual IR categories such as connectivity of information, materiality determination process and reliability and completeness of the integrated reports. However, despite the increasing trend and evidence of both symbolic and substantive IR practice, the authors conclude that the current IR practice is largely ceremonial in nature, produced to acquire organisational legitimacy.

Practical implications

For academics, the authors argue that there is a need to move away from the “what” and “why” aspects of the IR agenda to “how” IR should work inside organisations. In particular, academics should engage with firms through interventionist research to help firms implement integrated thinking and substantive reporting practices. For organisations, the findings draw attention to specific aspects of IR that require improvement. For policymakers, the study provides evidence based on the developmental stage of IR practice and draws attention to certain areas that need clarification. In particular, the International Integrated Reporting Council and Integrated Reporting Committee of South Africa should provide detailed guidelines on connectivity of information, material issues and disclosure of multiple capitals and their trade-offs. Finally, for educators, in line with the ACCA’s embedment of IR in its accounting courses, there is a need to incorporate IR in the curriculum; in particular, the authors argue that the best way to advance IR is in a “ubiquitous” spread in accounting and management courses.

Originality/value

This study provides empirical account of IR practice over time in the context of a regulatory IR environment. The construction of an IR checklist developed based on normative understanding of local and international IR guidelines is another novel approach of this study.

Details

Sustainability Accounting, Management and Policy Journal, vol. 7 no. 2
Type: Research Article
ISSN: 2040-8021

Keywords

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Article
Publication date: 5 September 2016

Abdifatah Ahmed Haji and Mutalib Anifowose

This paper aims to examine the role of the audit committee function as an internal assurance provider in the emerging integrated reporting (IR) practice. In particular…

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4020

Abstract

Purpose

This paper aims to examine the role of the audit committee function as an internal assurance provider in the emerging integrated reporting (IR) practice. In particular, the authors examine the role of the overall effectiveness, as well as specific aspects, of the audit committee function in IR practice.

Design/methodology/approach

The authors examine the integrated reports of 246 firm-year observations of large South African companies over a three-year period (2011-2013), following the introduction of an “apply or explain” IR requirement and an embedded “combined assurance” model in South Africa. Drawing from conflicting theoretical perspectives of economics-based (e.g. agency theory) and socio-political theories (e.g. legitimacy theory), the authors develop competing hypotheses to predict the role of the overall, as well as specific aspects, of the audit committee function in IR practice.

Findings

Consistent with the predictions of economics-related theories, the authors find that the overall effectiveness of the audit committee function has a strong positive association with the extent and quality of IR practice. In particular, audit committee authority and meetings are shown to have a significant positive impact on IR practice. However, as implied by socio-political theories, the authors do not find a significant association between key aspects of the audit committee function such as audit committee independence and financial expertise and IR practice.

Practical implications

This study informs local and international regulatory authorities, as well as the business community, about the potential significance of internal assurance mechanisms such as the audit committee function in the emerging IR practice. Given the practical challenges associated with independent external assurance provisions, the findings of this study suggest that internal assurance mechanisms – such as the audit committee function – can be genuine and cost-effective alternative assurance mechanisms in enhancing the credibility and reliability of non-financial reporting practices, particularly the emerging IR practice. The results also inform academic researchers to take cognisance from the expanding roles and responsibilities of audit committees and conduct in-depth investigation on “how” the audit committee function is handling the increasing responsibilities.

Originality/value

The study provides initial empirical account towards the role of the audit committee function in the emerging IR practice. The study is novel because it shows the significance of internal assurance mechanisms in wider organisational reporting practice.

Details

Managerial Auditing Journal, vol. 31 no. 8/9
Type: Research Article
ISSN: 0268-6902

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