The effect of integrated reporting quality on market liquidity and analyst forecast error

2020 ◽  
Vol 33 (4/5) ◽  
pp. 635-650
Author(s):  
Felipe Zúñiga ◽  
Roxana Pincheira ◽  
Julie Walker ◽  
Michael Turner
Keyword(s):  
South Africa ◽  
South African ◽  
Forecast Error ◽  
Forecast Accuracy ◽  
Market Liquidity ◽  
Analyst Forecast ◽  
Earnings Forecast ◽  
Integrated Reporting ◽  
Content Type ◽  
Practical Implications

Purpose The purpose of this study is to examine the effect of integrated reporting (IR) quality on both market liquidity and analyst forecast accuracy in South Africa as the only country in the world having IR as a listing requirement. This study uses the Sustainability Disclosure Transparency Index (SDTI) as a proxy for IR disclosure quality. The analysis of this study is based on the period after the publication of the international framework and its adoption by the International Reporting Committee of South Africa in 2014. Design/methodology/approach The companies sampled in this study are those listed on the Johannesburg Stock Exchange (JSE) from 2013 to 2015. The major factor driving the selection of this particular period was to not only analyse the existing IR practice but also investigate IR two years after King III came into force. The SDTI developed by Integrated Reporting and Assurance Services (IRAS) was used to analyse IR quality. Ordinary least squares regressions were analysed. The models include year and industry fixed effects. The variance inflation factor and its tolerance were used to test the severity of multi-collinearity. Also, alternative measures of IR quality and alternate model specifications were analysed to check the robustness of the results. Findings The authors find that quality of IR is associated with lower earnings forecast error. The evidence indicates that earnings forecast error is lower for firms in the materials sector of the South African economy. Consistent with prior research, the results also suggest that forecast errors are higher for companies with volatile returns and lower for larger firms. Additional analysis indicates that IR quality is positively associated with market liquidity. Overall, these findings support the virtues of IR, thus providing useful information to capital markets. Research limitations/implications The results obtained cannot be generalised to other jurisdictions. While the South African economy is the best setting to investigate IRs, new economies are also working actively on IR disclosures, so future research is likely to extend the literature in this field. Secondly, the availability of data constrained the sample size; however, this only mediates against finding any statistically significant result. While the IRAS database offers information about 324 JSE companies, Datastream covers only the 170 largest South African firms. In spite of the sample reduction, robust and consistent results are found in the market liquidity and analyst forecast accuracy proxies. Practical implications The sample period of this study (2013-2015) allows to understand disclosure behaviour after the international IR framework was published and endorsed by the JSE. The release of the IIRF gave clear guidance to firms regarding the nature and purpose of IR. Overall, the results obtained in this paper are consistent with IR expectations, thus providing useful information for investors and financial analysts. It is expected that the results might have practical implications for other nations about the cost and benefits of implementing integrated management reporting. Originality/value This paper contributes incrementally to the existing debate about whether disclosure information through IR has real benefits or is a passing fad. It examines the economic consequences of IR in a mandatory setting using an in-house ranking system, adapted to South Africa, designed by IRAS to determine IR quality. IRAS provides an SDTI that assesses the accuracy, consistency, completeness and reliability of quantitative data for 84 indicators based on IR and global reporting initiative aspects and subdivided into seven categories.

An overview of the current state of interlibrary loans in South Africa

2015 ◽  
Vol 43 (2) ◽  
pp. 76-83
Author(s):  
Jenny Raubenheimer ◽  
John Stephen van Niekerk
Keyword(s):  
South Africa ◽  
South African ◽  
Information Provision ◽  
Literature Study ◽  
Content Type ◽  
Current Trends ◽  
Current State ◽  
Computer Library ◽  
Practical Implications ◽  
Essential Service

Purpose – The purpose of this paper is to review interlending development in South Africa and current trends in interlending. Design/methodology/approach – Literature study and survey. Findings – Interlending is still an essential service in South Africa. Interlending systems must be used effectively to ensure rapid delivery of requested interlibrary loans. There is a significant use of WorldShare ILL, but there is a scope for substantial development. Research limitations/implications – This is not a comprehensive study but focusses on current interlending activities at some of the larger South African academic and special libraries and the use of Online Computer Library Centre systems. Practical implications – The paper provides some historical information and the extent of current interlending and systems used. Social implications – The paper gives an indication of the value of interlending in South Africa and its contribution to information provision. Originality/value – The paper provides a snapshot of interlending in South Africa and areas for development.

Top ten South African companies’ disclosure of materiality determination process and material issues in integrated reports

2018 ◽  
Vol 19 (2) ◽  
pp. 230-247 ◽  
Author(s):  
Natasja Steenkamp
Keyword(s):  
South African ◽  
Environmental Issues ◽  
Integrated Reporting ◽  
Content Type ◽  
Sustainable Performance ◽  
Award Winning ◽  
Reporting Framework ◽  
Determination Process ◽  
Practical Implications ◽  
Insight Into

Purpose The purpose of this paper is to develop guidelines of what award winning companies, leading practice in integrated reporting (IR) disclose in their integrated reports about material issues and their materiality determination processes. Also, to provide insight into what they disclose about their perception of materiality. Design/methodology/approach A content analysis was conducted to investigate what the top 10 South African companies of the 2015 Ernst and Young Excellence in Integrated Reporting Awards disclosed in their 2014 and 2015 integrated reports about their materiality determination processes, material issues and what materiality means to them. Thematic analyses were conducted in developing guidelines. Findings All except one company applied the International Integrated Reporting Framework. The materiality determination processes, material issues and companies’ descriptions of materiality are diverse. Material issues most companies identified relate to employees, social and environmental issues, customers and sustainable performance. Practical implications The proposed guidelines will provide useful strategies for organisations embarking on the IR journey about what issues could be considered as material and therefore included in integrated reports. It also proposes activities companies can undertake to identify, evaluate and prioritise material issues and execute their materiality determination process. Originality/value This paper is the first to develop guidelines of material matters and materiality determination processes. It also adds to existing literature on IR practice and the application of materiality.

Human behavior analysis under financial information science

2018 ◽  
Vol 36 (4) ◽  
pp. 685-704
Author(s):  
Feng Jui Hsu ◽  
Yu-Cheng Chen
Keyword(s):  
Earnings Management ◽  
Information Science ◽  
Forecast Error ◽  
Forecast Accuracy ◽  
Financial Information ◽  
Real Earnings Management ◽  
Analyst Forecast ◽  
Management Behavior ◽  
Content Type ◽  
Financial Characteristics

PurposeThe purpose of this paper is to investigate the relationships among corporate social responsibility (CSR), analyst forecast accuracy and firms’ earnings management behavior using US-based firms.Design/methodology/approachThe authors use the Kinder, Lydenberg, Domini (KLD) database to construct CSR performance scores and divide all firms into ten groups from high to low as a proxy for CSR performance. The authors obtained an initial sample of 33,364 firm-year observations from 1991 to 2012. Filtering for records which exist in the KLD, Compustat, and Center for Research in Security Prices databases lefts a total of 16,807 firm-year observations and CSR evaluation reports for 5,896 firms.FindingsThe authors find that high CSR-score firms have lower rates of analyst forecast error than their low CSR-score counterparts, suggesting that CSR performance is a useful means of forecasting earnings. Furthermore, firms with better CSR performance have significantly lower accrual-based earnings management behavior. However, the level of the manipulation behavior of real earnings management (REM) activities increased significantly in better CSR firms, suggesting that high CSR-score firms substituted REM methods for accrual-based methods. REM methods are consistent with the stipulations of the Sarbanes-Oxley Act and allow high CSR-score firms to better manipulate earnings behavior. These results hold after the authors control for various factors related to firm financial characteristics.Originality/valueOverall, the findings have important implications for investors and regulators to more easily assess firms’ earnings manipulation behavior and earnings stability under CSR performance and financial information in financial markets.

The trend of integrated reporting practice in South Africa: ceremonial or substantive?

2016 ◽  
Vol 7 (2) ◽  
pp. 190-224 ◽  
Author(s):  
Abdifatah Ahmed Haji ◽  
Mutalib Anifowose
Keyword(s):  
South Africa ◽  
South African ◽  
Integrated Reporting ◽  
Content Type ◽  
Reporting Practices ◽  
Trade Offs ◽  
Novel Approach ◽  
Determination Process ◽  
International Integrated Reporting Council

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.

scholarly journals Integrated reporting and analyst behaviour in diverse institutional settings

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Francesca Rossignoli ◽  
Riccardo Stacchezzini ◽  
Alessandro Lai
Keyword(s):  
Voluntary Disclosure ◽  
Environmental Governance ◽  
Forecast Accuracy ◽  
Institutional Setting ◽  
Analyst Forecast ◽  
Integrated Reporting ◽  
Content Type ◽  
Institutional Settings ◽  
Moderating Role

Purpose Given the limited studies that have started to focus on contexts where integrated reporting (IR) is voluntarily adopted, this paper aims to explore the moderating role of institutional characteristics on the association between voluntary report release and analyst forecast accuracy. Design/methodology/approach This study uses a quantitative empirical research method grounded on voluntary disclosure theory to provide empirical evidence on an international sample of companies choosing to release integrated reports. Preliminarily, a cluster analysis is used to group countries according to institutional patterns. Multivariate analyses detect the associations between report release choice and analysts’ forecast accuracy across clusters. Multiple econometric approaches are used to address the endogeneity concerns. Findings IR release is not informative for the market unless considering systematic variations across different institutional settings. Analysts’ forecast is more accurate for IR adopters located in strong institutional enforcement settings than for all the other companies. In the strong institutional setting that is also characterized by a pluralistic society, IR release benefits for the market are conditioned by the fact that the choice to release IR depends on environmental, governance and social disclosure-based managers remuneration and disclosure requirements. In weak institutional settings, IR release is not beneficial for the forecast accuracy. Research limitations/implications Academics and practitioners can gain understanding of the usefulness of voluntary IR across different institutional settings. Originality/value The study advances the understanding of the IR’s informativeness, overcoming the common dichotomous distinctions between strong and weak institutional settings.

Types of politically connected firms and analysts' earnings forecast

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Khairul Anuar Kamarudin ◽  
Wan Adibah Wan Ismail ◽  
Iman Harymawan ◽  
Rohami Shafie
Keyword(s):  
Information Asymmetry ◽  
Boards Of Directors ◽  
Forecast Accuracy ◽  
Earnings Forecasts ◽  
Analyst Forecast ◽  
Earnings Forecast ◽  
Content Type ◽  
Thomson Reuters ◽  
Different Types ◽  
The Impact

PurposeThis study examined the effect of different types of politically connected (PCON) Malaysian firms on analysts' forecast accuracy and dispersion.Design/methodology/approachThe study identified different types of PCON firms according to Wong and Hooy's (2018) classification, which divided political connections into government-linked companies (GLCs), boards of directors, business owners and family members of government leaders. The sample covered the period 2007–2016, for which earnings forecast data were obtained from the Institutional Brokers' Estimate System (IBES) database and financial data were extracted from Thomson Reuters Fundamentals. We deleted any market consensus estimates made by less than three analysts and/or firms with less than three years of analyst forecast information to control for the impact of individual analysts' personal attributes.FindingsThe study found that PCON firms were associated with lower analyst forecast accuracy and higher forecast dispersion. The effect was more salient in GLCs than in other PCON firms, either through families, business ties or boards of directors. Further analyses showed that PCON firms—in particular GLCs—were associated with more aggressive reporting of earnings and poorer quality of accruals, hence providing inadequate information for analysts to produce accurate and less dispersed earnings forecasts. The results were robust even after addressing endogeneity issues.Research limitations/implicationsThis study found new evidence of the impact of different types of PCON firms in exacerbating information asymmetry, which was not addressed in prior studies.Practical implicationsThis study has a significant practical implication for investors that they should be mindful of high information asymmetry in politically connected firms, particularly government-linked companies.Originality/valueThis is the first study to provide evidence of the impact of different types of PCON firms on analysts' earnings forecasts.

Corporate governance and earnings forecast accuracy in IPO prospectuses: an empirical analysis

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Faten Ben Ahmed ◽  
Bassem Salhi ◽  
Anis Jarboui
Keyword(s):  
Corporate Governance ◽  
Initial Public Offering ◽  
Audit Quality ◽  
Forecast Error ◽  
Emerging Market ◽  
Forecast Accuracy ◽  
Financial Statements ◽  
Small Sample ◽  
Earnings Forecast ◽  
Content Type

Purpose The purpose of this study is to present an extension to the research area dealing with the Tunisia initial public offering (IPO) associated earnings management forecasts, by an examination of the corporate governance mechanisms and earnings forecast accuracy relating impacts. Design/methodology/approach The authors use a multiple regression technique (FGLS) to estimate the effect of corporate governance structures and audit quality on earnings forecast accuracy. A sample of 33 IPO companies (165 firm-year observations) collected over the period ranging between 2011 and 2015 was applied. Findings The finding of this study reveals that the companies displaying a respectable audit committee size have a significant level of earnings forecast accuracy. Similarly, the accuracy level associated with IPO earnings forecasts is positively influenced by the use of the brand-name auditor. Research limitations/implications This study is based on a small sample from a single jurisdiction and limited time period. In fact, the findings examine how financial statements are measured and reported and assess additional regulation to protect investors and understand as well as manage earnings forecast accuracy in IPO prospectuses. Practical implications The findings of the study provide some implications for regulators, financial analysts, investors and users of financial statements, particularly who are investigating in potentially IPO firms. This study has an implication for market regulators who suggest that a requirement to publish very detailed forecast information would improve market efficiency by reducing the forecast error. Originality/value Previous studies on this subject carried out in other countries with a regulatory framework differ from that of Tunisia, which obligatorily obliges the publication of the forecasts in the prospectus of IPO and capital increase. This is one of the most important studies that simultaneously tests the impacts of corporate governance and audit quality on earnings forecast accuracy in an emerging market, and the results of this study may give strength to Tunisian as well as other developing countries.

South African women leaders, transformation and diversity conflict intersections

2018 ◽  
Vol 31 (4) ◽  
pp. 877-894 ◽  
Author(s):  
Claude-Hélène Mayer ◽  
Sabie Surtee ◽  
Jasmin Mahadevan
Keyword(s):  
South Africa ◽  
Women Leaders ◽  
South African ◽  
African Women ◽  
Structural Level ◽  
Content Type ◽  
Constructivist Perspective ◽  
Race Ethnicity ◽  
South African Women ◽  
Practical Implications

Purpose The purpose of this paper is to investigate diversity conflict intersections and how the meanings of diversity markers such as gender and race might be transformed. It highlights the resources of South African women leaders in higher education institutions for doing so. Design/methodology/approach This study proceeds from a social constructivist perspective, seeking to uncover narrated conflict experiences via a hermeneutical approach. Findings Women leaders in South Africa experience diversity conflict across multiple intersecting diversity markers, such as gender, race, ethnicity and class. They are united by inner resources which, if utilized, might bring about transformation. Research limitations/implications Intersectional approach to diversity conflict is a viable means for uncovering positive resources for transformation across intersecting diversity markers. Practical implications Practitioners wishing to overcome diversity conflict should identify positive resources across intersecting diversity markers. This way, organizations and individuals might bring about transformation. Social implications In societal environment wherein one diversity marker is institutionalized on a structural level, such as race in South Africa, diversity conflict might be enlarged beyond its actual scope, thereby becoming insurmountable. This needs to be prevented. Originality/value This paper studies diversity conflict intersections in a highly diverse societal environment in organizations facing transformational challenges and from the perspective of women leaders.

Initial trends in corporate disclosures following the introduction of integrated reporting practice in South Africa

2017 ◽  
Vol 18 (2) ◽  
pp. 373-399 ◽  
Author(s):  
Abdifatah Ahmed Haji ◽  
Mutalib Anifowose
Keyword(s):  
South Africa ◽  
South African ◽  
Corporate Disclosure ◽  
Content Type ◽  
Institutional Legitimacy ◽  
Reporting Practices ◽  
Trade Offs ◽  
Practical Implications ◽  
Over Time ◽  
Corporate Disclosures

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.

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