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The association between integrated reporting and firm valuation

Author

Listed:
  • Kin-Wai Lee

    (Nanyang Technological University)

  • Gillian Hian-Heng Yeo

    (Nanyang Technological University)

Abstract

This paper examines the association between Integrated Reporting and firm valuation. Using a sample of listed firms in South Africa, we examine the association between cross-sectional variation in Integrated Reporting disclosures and firm valuation in the period after the implementation of Integrated Reporting. We find that firm valuation is positively associated with Integrated Reporting disclosures. This result suggests that on average, the benefits of Integrated Reporting exceed its costs. We predict that Integrated Reporting reduces the information processing costs in firms with complex operating and informational environment. Consistent with our prediction, we find that the positive association between firm valuation and Integrated Reporting is stronger in the firms with higher organizational complexity, suggesting that Integrated Reporting improves the information environment in complex firms such as firms with high intangible assets, firms with multiple business segments and large firms. Furthermore, we find that in firms with higher external financing needs, the sub-sample of firms with higher Integrated Reporting have higher firm valuations, suggesting that Integrated Reporting mitigates the information asymmetry between corporate insiders and external suppliers of capital. Additional analysis indicates that firms with high Integrated Reporting outperform those with low Integrated Reporting both in terms in stock market and accounting performance.

Suggested Citation

  • Kin-Wai Lee & Gillian Hian-Heng Yeo, 2016. "The association between integrated reporting and firm valuation," Review of Quantitative Finance and Accounting, Springer, vol. 47(4), pages 1221-1250, November.
    • Handle: RePEc:kap:rqfnac:v:47:y:2016:i:4:d:10.1007_s11156-015-0536-y
    DOI: 10.1007/s11156-015-0536-y
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    More about this item

    Keywords

    Firm valuation; Integrated reporting; Corporate disclosures;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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