Integrated reports: disclosure level and explanatory factors

Comunicación web de información no financiera en las empresas de cuatro índices bursátiles europeos

Tanto la Agenda 2030 de la ONU como la Directiva 2014/95/UE han impulsado la divulgación de información sobre indicadores no financieros y la hacen obligatoria para todas las empresas y entidades de interés público (EIP). Por tanto, las empresas de los índices bursátiles europeos deben comunicar la información reconocida con las siglas ESG, la medioambiental (Environmental), la social (Social) y la de Gobernanza (Governance). Además, las Tecnologías de la Información y Comunicación (TIC) permiten la divulgación de dicha información a través de las webs y su comunicación a los stakeholders. A partir de esta premisa, esta investigación tiene como objetivo evaluar la divulgación web de la información no financiera por parte de las empresas de cuatro índices bursátiles europeos (IBEX35, AEX25, DAX30 y CAC40) por medio de un estudio exploratorio, descriptivo y analítico de la información ESG y mediante un análisis de cumplimiento normativo. Los resultados revelan la existencia de una información dispersa, incompleta, divulgada en medidas heterogéneas y con importantes diferencias entre las empresas europeas en cuanto a la divulgación en los sitios web, así como en el posible margen para mejorarla y las limitaciones en cuanto al alcance de verificabilidad de la ESG.

Why Integrated Reporting? Insights from Early Adoption in an Emerging Economy

The purpose of this research is to contribute new and relevant information about the early adoption of integrated reporting in an emerging economy, in this case the Chilean economy, with emphasis on the reasons for its use, the perceived benefits, and the difficulties experienced during the process of adoption. Methodologically, this work uses a qualitative approach, utilising semi-structured interviews as a data collection instrument that are applied to the managers in charge of preparing this reporting for a sample of companies that trade on the Chilean stock exchange. These interviews were interpreted using an analysis of their content. The results obtained are in accordance with the literature and the empirical evidence, with the characteristics belonging to an emerging economy and highlighting the importance of communicating with the stakeholders. The relationship with the stakeholders and the inclusion in international contexts were the most valued. It is also highlighted that all of the companies analysed declare sustainability as a strategic focus, which is an infrequent situation in developing economies. One limitation of this work is the low valuation and use that market agents still assign to integrated reporting in Chile, which affects the degree of preparation and utilisation, and could be explained by other types of incentives and motivations.

The adoption of integrated reporting by state-owned enterprises (SOEs) – an international comparison

Purpose

This paper aims to establish the extent to which South African state-owned entities (SOEs), where integrated reporting is a quasi-mandatory reporting requirement, have incorporated the principles of the international integrated reporting framework. These identified South African SOE reporting practices are compared with the ‘integrated reporting’ related disclosures of SOEs in selected countries, where integrated reporting remains voluntary.

Design/methodology/approach

This paper deploys a qualitative research approach, to thematically analyse the content of publicly available annual or integrated reports of South Africa SOEs, as the primary country of analysis, with those of their counterparts in five purposively selected countries. The relative scores for the SOEs of each country is calculated using a disclosure index derived from the international integrated reporting framework principles.

Findings

The paper found that despite being a quasi-mandatory reporting requirement, not all South African SOEs complied with all the international integrated reporting framework principles. Accepting the assertion that integrated reporting enhances organisational transparency and accountability, the accountability disclosure practices of South African SOEs appear more comprehensive than their counterparts in other countries.

Originality/value

Extant research into integrated reporting has primarily focussed on the profit-seeking private sector, with limited research into its applicability in the public sector. This paper attempts to address this paucity by examining aspects of integrated reporting by South African SOEs, which are then compared to accountability reporting practices in other countries.

Archival research on integrated reporting: a systematic review of main drivers and the impact of integrated reporting on firm value

Integrated reporting (IR) represents an innovative approach to business reporting especially by Public Interest Entities (PIEs). In addition to financial capital, the integrated report includes material information about manufactured, intellectual, human, social and relational, and natural capitals. Although there has been a steady growth in empirical IR research, there is—as yet—no literature review on the business case for IR. Thus, the purpose of this study is to convey a detailed understanding of the governance-, (non) financial performance-, and reporting-related determinants of IR and its contribution to firm value in line with the business case argument. To do so, we selected 85 quantitative peer-reviewed archival studies on that topic. We have then differentiated said studies between those that focus on IR adoption versus those that focus on IR quality, with a legitimacy- and stakeholder-theory-based framework. This differentiation is crucial, to stress the challenges of greenwashing policies and information overload. Here, in contrast to former literature reviews on IR, we provide new insights into this emerging research topic and concentrate on archival IR research. We are also interested in recent moderator- and mediator analysis in archival IR research since the business case argument for IR may require a specific environment, in addition to the main variables we have included. We likewise give a detailed overview of included variables and proxies and compare their main statistical effects. Our literature review demonstrates that (1) board composition and (2) stakeholder pressure positively influence IR quality; whereas (3) (non) financial performance leads to increased IR adoption and quality. We also find that both IR adoption and IR quality are linked with positive consequences on firm valuation, as they lead to higher total performance measures. Last but not least, this analysis includes useful recommendations for future IR research.

Disclosure Dynamics and Non-Financial Reporting Analysis. The Case of Romanian Listed Companies

New challenges and perspectives to improve non-financial reporting and the disclosure of environmental, social, and governance indicators have been launched towards the development horizon of Romanian public interest entities, implementing the provisions of Directive 2014/95/EU in the local regulatory framework. In this context, our approach focused on the content analysis of the non-financial information reported by listed companies, for the period 2017–2019, and the measure of the average disclosure degree on environmental, social, economic, and governance (ESEG) indicators. To measure the average degree of disclosure, a composite index was constructed through the main component analysis for categorical data that allowed the classification of sampled companies by sustainable performance. The results showed a slight increase in the ESEG disclosure index at the level of the sampled companies, from 47 units in 2017 to 52 units in 2019, several companies “went ahead” and others “recovered over the period”. Cross-sectional analysis revealed differences in the average non-financial disclosure index, and also in the disclosure index of ESEG indicators. The non-parametric correlation analysis highlighted the existence of a statistically significant positive correlation of medium intensity between the disclosure index of non-financial information and the publication of the non-financial statement or report.

KPIs Reporting and Financial Performance in the Transition to Mandatory Disclosure: The Case of Italy

European companies of public interest requested to comply with the Directive 2014/95/EU on Non-Financial Information (NFI) are allowed to fulfil the regulatory obligation following the Global Reporting Initiative (GRI) guidelines, which constitute at present the most widely spread framework for sustainability reporting. Given such prevalence, this paper examines the level of disclosure on Key Performance Indicators (KPIs) and its relationship with financial performance over the period 2016–2018 for Italian-listed companies adopting GRI guidelines to convey NFI under the Decree 254/2016. The research applies content analysis of the annual and sustainability reports to measure the disclosure index on KPIs, and Data Envelopment Analysis (DEA) to estimate the financial performance. A Tobit-regression model explores the nexus between financial performance and companies’ disclosure. Findings show a decrease in the disclosure levels in the early adoption of mandatory NFI and a significant association with the financial performance of the sampled companies. The study, assuming a comprehensive view of the financial indicators, improves our knowledge of the relationship between sustainability disclosure and financial performance and adds to the literature on the evolution of NFI in the transition from voluntary to mandatory regime.

Does Corporate Governance Affect the Quality of Integrated Reporting?

This study examines how governance mechanisms affect the quality of integrated reporting (IR), which is fast emerging both as a tool to help firms understand their value creation process and to communicate effectively with external stakeholders. This study first developed an index to assess the quality of integrated reports. Subsequently, 132 integrated reports of Sri Lankan public listed companies selected over a three-year period were content analysed. The hypotheses formulated on the relationship between corporate governance and the quality of IR based on the agency theory were analysed using multivariate linear regression and panel regression. The results show that there is limited support from the corporate governance system for providing quality information to stakeholders on the value creation process through IR, except for board size and the availability of a separate risk management committee. This is the result of the heavy emphasis of corporate governance requirements and the resulting mechanisms of Sri Lankan companies on mandatory corporate reporting requirements compared to a voluntary reporting model such as IR. Since many corporate governance aspects are meant to fulfill mandatory reporting requirements, the results imply that the directors have given limited attention to providing quality information through voluntary disclosure practices such as IR, although they use resources to prepare integrated reports.

Integrated Reporting and European State-Owned Enterprises: A Disclosure Analysis Pre and Post 2014/95/EU

The European Directive 2014/95/EU regulating the disclosure of non-financial information for public interest organisations is enjoying its first years since entering into force in 2017. The emerging of social, environmental and sustainability issues in combination with the New Public Management (NPM) reforms, led public sector entities to huge demands of accountability. Long time before the European Union Directive (EUD) on non-financial information, public sector entities were pushed to demonstrate to a broad range of stakeholders how public resources are used. Accordingly, the stakeholders’ increasing demand for social and environmental information has encouraged the adoption of different types of reports by organisations, such as the Corporate Social Responsibility (CSR) Report, Sustainability Reporting (SR) and the Integrated Report (IR).In the context of State-Owned Enterprises (SOEs), the disclosure of non-financial information gains a pivotal relevance as these type of organisations face a more comprehensive range of stakeholders than private organisations. In this vein, the present paper aims to investigate whether the mandatory disclosure directive increased the level of information provided by SOEs issuing an IR between the years 2016 and 2017 in order to demonstrate whether a mandatory regulation leads to higher disclosure.

Determinants of Companies that Disclose High-Quality Integrated Reports

Integrated reporting is becoming increasingly popular. The focus of this study was to assess the overall integrated reporting quality of global companies and find determinants of high-level integrated reporting. Qualitative text analysis was performed on the 2017 integrated reports of 110 global organizations to determine in what way companies report on specific topics related to the six capitals: social and relationship, human, intellectual, manufacturing, natural, and financial. Using a novel assessment technique, scores were then assigned according to the details provided in the integrated reports on the various topics. This was done for each form of capital, and the total integrated score was subsequently calculated as the average between all the capital scores. Finally, a regression analysis was performed to determine the characteristics of high-quality integrated reporters. The results of univariate analysis and two-stage least squares instrumental variable (2SLS) regression indicate that companies of a larger size with a higher female board ratio and listing in the International Integrated Reporting Committee (IIRC) examples database are more likely to publish a higher quality integrated report. The results imply that these variables are the main disclosure drivers. However, a significant negative correlation was found between integrated report quality and the variables related to female executive ratio, external board member ratio, profitability, leverage, and previous report experience, as well as report length. No significant association was found between the location and industry group and report quality. The empirical evidence of this study shows that even though integrated reporting has become more common overall, the comparability and quality of the reports still remain low.

Examining the association between quality of integrated reports and corporate characteristics

This paper examines the quality of integrated reports of listed firms in South Africa and the associated factors. Data were obtained from a sample comprising 100 firm-year observations of 20 companies in Johannesburg Stock Exchange over the period (2013–2017). Analysis of data involves descriptive statistics, spearman rank correlation analysis and Kruskal-Wallis H test. The result shows a significant relationship between the quality and length of integrated reports. Firms vary in the level of quality of their integrated reports on the account of differences in profitability, board size, gender and firm size. No significant relationship was found between quality of integrated reports and leverage. The result of this study indicates that the length of the integrated report signals the level of quality of such report, which may be necessary in disclosing all material matters to satisfy the needs of a wide range of stakeholders.

Empirical Analysis of Non-Financial Reporting by Spanish Companies

Spain is one of the European countries that is the most strongly committed to the presentation of non-financial information. In 2017, Spain adapted its legislation to Directive 2014/95/EU through Royal Decree-Law 18/2017, which required Public Interest Entities (PIEs) to provide information in accordance with the requirements of the European Union (EU) Directive, with respect to financial years from 1 January 2017. Our research is focused on Spanish IBEX-351 listed companies and seeks to identify current trends in non-financial reporting. To our knowledge, the present paper is the first study to examine the impact made in Spain by the legislative changes. Our aim is to analyse the publication of non-financial information by Spanish listed companies whose first reports in this regard were made from early 2018. Specifically, we consider the impact of this information disclosure, determining whether the companies in question restrict themselves to meeting regulatory requirements or whether they go further and voluntarily supply additional information. Our findings show that the level of regulatory compliance produced is associated with the business sector in which the company operates. We also show that the highest rates of disclosure of non-financial information correspond to companies that provide this information in the sustainability report.