Is voluntary International Integrated Reporting Framework adoption a step on the sustainability road and does adoption matter to capital markets?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Pei-Chi Kelly Hsiao ◽  
Charl de Villiers ◽  
Tom Scott

Purpose This paper aims to examine the type of firms that voluntarily adopt the International Integrated Reporting Framework (IIRF) and how markets respond to voluntary IIRF adherence. Design/methodology/approach Analysis of a matched global sample of listed firms that voluntarily adopt the IIRF (IIRF firms) and those that do not (non-IIRF firms). The samples range from 188 to 436 observations as alternative research designs, different matched samples and regression specifications, and several sensitivity analyses were conducted. Findings In markets where integrated reporting (IR) is not mainstream, voluntary IIRF adoption is more likely for firms with established sustainability practices. Such findings suggest that the IIRF is an incremental innovation for sustainability rather than an innovation that radically changes management and reporting practices. In Japan, where IR is mainstream, results show no observable differences between IIRF firms and non-IIRF firms. Consistent with the determinants results, this paper finds no evidence of associations between voluntary IIRF adoption and the information environment, the cost of equity or firm value. However, the additional analysis provides preliminary evidence suggesting capital market effects may differ for IIRF firms with higher sustainability or market performance. Practical implications This study offers useful insights into the current global debate on whether there is value in adopting the IIRF. Originality/value This study adds to the limited body of research on the determinants and consequences of voluntary IIRF adoption, offering insights for regulators, practitioners and proponents of IR. This study is the first to provide quantitative evidence of the influence sustainability practices have on voluntary IIRF adoption. Further, the results add to the current global debate on whether there is value in adopting the IIRF. This paper finds that voluntary IIRF adoption has no clear and distinct influence on disclosure practices and capital markets, suggesting there are no additional benefits from prioritising the promotion or adoption of the IIRF over other disclosure forms. Unless there are advancements supporting the implementation of integrated thinking and information connectivity, the potential for the IIRF to improve information quality may be limited to encouraging more non-financial disclosure and transparency in countries where integrated disclosures are not trending.

2017 ◽  
Vol 25 (4) ◽  
pp. 461-480 ◽  
Author(s):  
John Dumay ◽  
Cristiana Bernardi ◽  
James Guthrie ◽  
Matteo La Torre

Purpose This paper is motivated by the call for feedback by the International Integrated Reporting Council (IIRC) from all stakeholders with knowledge of the International Integrated Reporting Framework (<IRF>) and specifically of the enablers, incentives and barriers to its implementation. The paper synthesises insights from contemporary accounting research into integrated reporting (IR) as a general concept and <IR> as espoused by the IIRC in the <IRF> (IIRC, 2013). The authors specifically focus on possible barriers and emphasise the specific issues the authors feel could be rectified to advance the <IRF>, along with the areas that may potentially hinder its wider adoption and implementation. Design/methodology/approach The paper draws upon and synthesises academic analysis and insights provided in the IR and <IR> academic literature as well as various directives, policy and framework pronouncements. Findings The flexibility and lack of prescription concerning actual disclosures and metrics in the <IRF> could allow it to be used for compliance, regardless of the other benefits lauded by the IIRC. Thus the authors see forces, both external and internal, driving <IR> adoption, with one prominent example being the European Union Directive on non-financial reporting. Because of the different ways in which IR is understood and enacted, there are numerous theoretical and empirical challenges for academics. The authors paper highlights potential areas for further robust academic research and the need to contribute to <IR> policy and practice. Research limitations/implications The paper provides the IIRC, academics, regulators and reporting organisations with insights into current practice and the <IRF>. The authors highlight the need for further development and evidence to help inform improvements both from a policy and a practice perspective. A key limitation of the authors’ work is that the authors draw upon a synthesis of the existing literature which is still in an early stage of development. Originality/value The paper provides the IIRC with several insights into the current <IRF> and specifically with the enablers, incentives and barriers to its implementation. Also, it provides academic researchers with a number of important observations and an agenda upon which the authors can build their future research.


2020 ◽  
Vol 28 (5) ◽  
pp. 889-914 ◽  
Author(s):  
Lucia Biondi ◽  
John Dumay ◽  
David Monciardini

Purpose Motivated by claims that the International Integrated Reporting Framework (IRF) can be used to comply with Directive 2014/95/EU (the EU Directive) on non-financial and diversity disclosure, the purpose of this study is to examine whether companies can comply with corporate reporting laws using de facto standards or frameworks. Design/methodology/approach The authors adopted an interpretivist approach to research along with current regulatory studies that aim to investigate business compliance with the law using private sector standards. To support the authors’ arguments, publicly available secondary data sources were used, including newsletters, press releases and websites, reports from key players within the accounting profession, public documents issued by the European Commission and data from corporatergister.com. Findings To become a de facto standard or framework, a private standard-setter requires the support of corporate regulators to mandate it in a specific national jurisdiction. The de facto standard-setter requires a powerful coalition of actors who can influence the policymakers to allow its adoption and diffusion at a national level to become mandated. Without regulatory support, it is difficult for a private and voluntary reporting standard or framework to be adopted and diffused. Moreover, the authors report that the <IRF> preferences stock market capitalism over sustainability because it privileges organisational sustainability over social and environmental sustainability, emphasises value creation over holding organisations accountable for their impact on society and the environment and privileges the entitlements of providers of financial capital over other stakeholders. Research limitations/implications The authors question the suitability of the goals of both the <IRF> and the EU Directive during and after the COVID-19 crisis. The planned changes to both need rethinking as we head into uncharted waters. Moreover, the authors believe that the people cannot afford any more reporting façades. Originality/value The authors offer a critical analysis of the link between the <IRF> and the EU Directive and how the <IRF> can be used to comply with the EU Directive. By questioning the relevance of the compliance question, the authors advance a critique about the relevance of these and other legal and de facto frameworks, particularly considering the more pressing needs that must be met to address the economic, social and environmental implications of the COVID-19 crisis.


2018 ◽  
Vol 19 (2) ◽  
pp. 230-247 ◽  
Author(s):  
Natasja Steenkamp

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.


2016 ◽  
Vol 31 (1) ◽  
pp. 17-40 ◽  
Author(s):  
Laura K. Rickett

Purpose – Financial blogs provide an online platform whereby retail investors effortlessly gain access to an abundant array of investment guidance. Prior studies find that the market reacts to financial blogs and similar online venues but results are inconsistent and financial blogs, a growing area in new media and distinct from other online venues, have received little attention. The purpose of this paper is to examine the particular conditions in which financial blogs serve an infomediary role in capital markets; when information asymmetry is high, earnings quality is low, and during economic uncertainty. These are conditions in which retail investors may seek easily accessible advice for their investment decisions. Design/methodology/approach – Abnormal returns for firms mentioned in blog posts on the SeekingAlpha.com financial blog are examined using a multivariate regression to determine whether or not the market reaction associated with these posts is related to information asymmetry, earnings quality, and economic uncertainty. Findings – Results indicate that abnormal returns are associated with the SeekingAlpha.com financial blog when information asymmetry is high and during bearish market conditions, and in particular when buy recommendations are posted on the blog for firms with high information asymmetry. This association is strengthened for firms with low institutional ownership, a proxy for unsophisticated or retail investors. Research limitations/implications – Results are based on a sample collected during a specific time period in order to detect whether financial blogs serve an infomediary role during uncertain market conditions. Practical implications – Results of this study can be useful to company executives who may want to monitor investment advice posted about their firm on financial blogs. Financial blogs and other forms of social media such as Twitter and Facebook are becoming the “new normal” in the investor information environment, a trend that is likely to continue. Originality/value – Financial blogs provide an abundance of supplemental information demanded by investors. Financial blogs represent a form of “new media,” now considered a key component of firms’ information environment (Saxton, 2012). In contrast to prior studies which primarily investigate only whether the market reacts to financial blogs or similar online platforms such as stock message boards, this study attempts to understand the specific conditions in which the market reacts to financial blogs. The results provide a rationale as to when and why investors rely on financial blogs and whether financial blogs serve an infomediary role in capital markets.


2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Thilini Cooray ◽  
Samanthi Senaratne ◽  
Nuwan Gunarathne ◽  
Roshan Herath ◽  
Dileepa Neelangi Samudrage

Purpose This paper aims to examine the coverage of and trends in reporting content elements in the integrated reports of the Sri Lankan companies following the International Integrated Reporting Framework (IIRF). Design/methodology/approach Based on a comprehensive checklist developed on the content elements of the IIRF, 171 corporate integrated reports were content-analyzed over a period of three years. The results were theorized subsequently using the legitimacy theory. Findings The study identifies that the extent of and trend in the coverage of content elements of the IIRF have increased during the period under consideration despite some under-addressed areas. It indicates that Sri Lankan companies are making progress in the preparation of integrated reports in line with the IIRF, which provides evidence in support of both strategic and institutional perspectives of the legitimacy theory because of the proactive actions taken by managers to acquire legitimacy along with the other normative and mimetic pressures available in the IR landscape. Originality/value This is one of the first studies that evaluate the compliance of IR adopters with the IIRF overtime in the entirety of a single country. It also develops a comprehensive index to capture the disclosure requirements of IR and extends the analysis to a voluntary context using both strategic and institutional perspectives of the legitimacy theory.


2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Megawati Oktorina ◽  
Sylvia Veronica Siregar ◽  
Desi Adhariani ◽  
Aria Farah Mita

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.


2018 ◽  
Vol 26 (2) ◽  
pp. 305-333 ◽  
Author(s):  
Merve Kılıç ◽  
Cemil Kuzey

Purpose This paper aims to investigate the adherence level of current company reports to the International Integrated Reporting Council (IIRC) integrated reporting framework through analysis of whether and to what extent those reports include the content elements of this framework. This study also aims to examine the impact of corporate sustainability characteristics on the adherence level of current company reports to the integrated reporting framework. Design/methodology/approach The sample for this research comprises the non-financial companies which were listed on Borsa Istanbul, the Turkish stock exchange, as of 31 December 2015. The authors constructed a disclosure index based on the content elements of the IIRC reporting framework. They then measured the integrated reporting disclosure score (IRS) of each company through a manual content analysis of its annual reports and stand-alone sustainability reports. To test the hypotheses, the authors performed a number of statistical analyses. Findings The authors determined that current company reports mainly present generic risks rather than company-specific; provide positive information while dismissing negative information; present financial and non-financial initiatives separately; lack a strategic focus; and include backward-looking information rather than forward-looking information. Consistent with the predictions, the authors found that the IRS is significantly and positively associated with sustainability reporting, Global Reporting Initiative (GRI) adoption, sustainability index listing and the presence of a sustainability committee. Originality/value This study contributes to the literature by enhancing the understanding of integrated reporting practices through the application of a checklist based upon the IIRC integrated reporting framework. Further, this study contributes to the literature by evaluating the impact of corporate sustainability characteristics on IRS.


2019 ◽  
Vol 16 (5) ◽  
pp. 613-629 ◽  
Author(s):  
Mumbi Maria Wachira ◽  
Thomas Berndt ◽  
Carlos Martinez Romero

Purpose This study aims to explore factors influencing voluntary adoption of international sustainability and integrated reporting guidelines within a mandatory reporting framework. Given South Africa’s political history, the authors argue that accounting practice can be used to secure the legitimacy and transparency of businesses. Design/methodology/approach Two logistic regression equations are used to predict the likelihood of firms’ subscribing to either Global Reporting Initiative (GRI) or the Integrated Reporting (<IR>) framework, respectively. The authors consider annual, sustainability and integrated reports issued for the financial year ended 2014. Findings The results show a statistically and significant positive association between the adoption of the GRI’s guidelines and the level of transparency of non-financial disclosures and environmental sensitiveness. The application of the <IR> framework is also associated with the level of a firm’s transparency score and with its respective analyst following, which acts as a measure for capital markets requiring a high information environment. Originality/value This paper illustrates the development of integrated and sustainability reporting (SR) practices within an emerging market. By drawing distinctions between locally developed South African codes of corporate governance, namely, King I-III and international guidelines proxied by the GRI’s guidelines for SR, and the <IR> framework, the authors show that South African firms still adopt international guidelines despite the mandatory framework in place.


2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Larissa von Alberti-Alhtaybat ◽  
Zaidoon Alhatabat ◽  
Khaldoon Al-Htaybat

Purpose The current study aims to investigate the development of the sustainability habitus in the Arab Middle East (ME) based on the pioneer case organisation, Aramex, which has been the pioneer of sustainability practices and reporting. The context of the Arab region, as well as the global logistics sector, has significantly influenced the development of sustainable development at Aramex, as illustrated by their sustainability and integrated reports. Design/methodology/approach The research approach of the current study is qualitative on the basis of open and selective coding techniques. The case organisation’s annual sustainability and integrated reports and additional relevant publicised information are analysed. Using publicised information from different sources increases triangulation and allows for more reliable findings. The theoretical context is Bourdieu’s habitus and field, which also reflects the interplay between habitus and field, and how Aramex’s sustainability practices and reports are being constructed. Findings The findings reflect Aramex’s sustainability practices and related reporting, subsumed in its organisational sustainability habitus. They span the sustainability reporting endeavours of the case organisation, commencing with the first sustainability report in 2006 until the most recent annual integrated report in 2018. Aramex is the precursor of sustainability and integrated reporting (IR) in the ME and is a significant contributor to developing a sustainability habitus in the region. The findings outline various elements of their reports as evidence of sustainability practices and reporting in the ME and the global logistics sector and as an illustration of the developing sustainability habitus. Originality/value This study reviews the original case of Aramex and its sustainability and IR practices. It also discusses the company’s practices and reporting details with regard to its organisational sustainability habitus and interplay with the local, Arab World and global, logistics sector, fields.


2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Adriana Rossi ◽  
Mercedes Luque-Vílchez

Purpose This study aims to examine the process through which sustainability is integrated into the organizational practices of accounting. Design/methodology/approach Action research, drawing on the lens of neo-institutional theory, is used to explore the integration process of sustainability in an Italian company. Findings The results show how different factors and organizational dynamics contribute to the initiation of both sustainability reporting and the progressive diffusion of sustainability practices in this organization, within the small- and medium-sized enterprise (SME) category. In addition, signs of integrated thinking were identified while charting the process of sustainability reporting and its institutionalization within the company. Research limitations/implications The study shows that the idea of integrated thinking was rooted in organizational culture prior to the International Integrated Reporting Council (IIRC) framework and the momentum it gave to integrated reporting. In this sense, this research provides evidence to confirm the existence of an alternate narrative in relation to the one offered by the IIRC framework. Practical implications The present study contributes to understanding how SMEs can integrate sustainability into their accounting systems. Managers working in these organizations may learn from this experience. Originality/value On the one hand, this study further the knowledge of sustainability integration processes within an organizational practice, especially in the case of SMEs. On the other hand, the study is, perhaps, the first to identify signs of integrated thinking on the journey through the sustainability institutionalization process.


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