Earnings Management in the Age of Integrated Reporting: A Conceptual Analysis

In response to the growing demand for greater transparency and accountability in corporate reporting, integrated reporting has emerged as a comprehensive framework that combines financial and non-financial information to present a holistic view of a company’s performance. However, despite the promise of IR, questions remain about its ability to curb earnings management practices, particularly in contexts where governance structures and regulatory oversight are weak. This conceptual paper aims to analyse the relationship between IR and EM, specifically exploring how the adoption of IR may mitigate or exacerbate earnings manipulation in emerging markets such as Malaysia. The study employs a conceptual analysis methodology, reviewing existing literature on IR and EM through the theoretical lenses of agency theory and stakeholder theory. This paper builds on previous empirical studies to create a conceptual framework that connects the adoption of IR with less earnings manipulation, if strong governance frameworks and effective regulatory enforcement are in place. The findings suggest that IR has the potential to improve corporate transparency and accountability by reducing information asymmetry and aligning corporate practices with stakeholder expectations. However, the effectiveness of IR in reducing EM is conditional on the presence of robust governance structures. The implications of this study are both theoretical and practical. Theoretically, it contributes to the growing body of literature on corporate governance and financial reporting by highlighting the role of IR in mitigating agency conflicts. Practically, it offers insights for policymakers and regulators to strengthen governance frameworks and IR enforcement to enhance corporate transparency and reduce opportunistic financial practices.