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Is integrated reporting associated with corporate financing decisions? Some empirical evidence

Author

Listed:
  • Tesfaye T. Lemma
  • Arifur Khan
  • Mohammad Badrul Muttakin
  • Dessalegn Getie Mihret

Abstract

Purpose - The emerging practice of integrated reporting (IR) has raised curiosity regarding how it impacts on firms and their stakeholders. The purpose of this paper is to examine whether a firm’s decision to provide integrated reports is associated with its financing decisions and whether financial reporting quality mediates the relationship. Design/methodology/approach - A usable sample of 832 firm-year observations was employed based on a dataset drawn from companies listed on the Johannesburg Securities Exchange (JSE) for the period between 2009 and 2015. Findings - The findings show that firms that provide integrated reports tend to have lower levels of leverage, and this effect is partially mediated through financial reporting quality. We further document that the partial effect of financial reporting quality on leverage is stronger for firms that provide integrated reports than is the case for other firms. The findings suggest that IR enables firms to employ equity financing, which is a more informationally-sensitive source of capital than debt financing. Originality/value - This study is the first to document evidence suggesting that management can draw on IR in devising optimal financing strategy.

Suggested Citation

  • Tesfaye T. Lemma & Arifur Khan & Mohammad Badrul Muttakin & Dessalegn Getie Mihret, 2019. "Is integrated reporting associated with corporate financing decisions? Some empirical evidence," Asian Review of Accounting, Emerald Group Publishing Limited, vol. 27(3), pages 425-443, September.
    • Handle: RePEc:eme:arapps:ara-04-2018-0101
    DOI: 10.1108/ARA-04-2018-0101
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    Citations

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    Cited by:

    1. Amir Hossain & Sudipta Bose & Abul Shamsuddin, 2023. "Diffusion of integrated reporting, insights and potential avenues for future research," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(2), pages 2503-2555, June.
    2. Minga Negash & Tesfaye T. Lemma, 2020. "Institutional pressures and the accounting and reporting of environmental liabilities," Business Strategy and the Environment, Wiley Blackwell, vol. 29(5), pages 1941-1960, July.
    3. Pappu Kumar Dey, 2020. "Value relevance of integrated reporting: a study of the Bangladesh banking sector," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 17(4), pages 195-207, December.
    4. Yingli Wu & Guangji Tong, 2022. "The evaluation of agricultural enterprise's innovative borrowing capacity based on deep learning and BP neural network," International Journal of System Assurance Engineering and Management, Springer;The Society for Reliability, Engineering Quality and Operations Management (SREQOM),India, and Division of Operation and Maintenance, Lulea University of Technology, Sweden, vol. 13(3), pages 1111-1123, December.
    5. Patrick Velte, 2022. "Archival research on integrated reporting: a systematic review of main drivers and the impact of integrated reporting on firm value," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 26(3), pages 997-1061, September.
    6. Tesfaye T. Lemma & Mehrzad Azmi Shabestari & Martin Freedman & Mthokozisi Mlilo, 2020. "Corporate carbon risk exposure, voluntary disclosure, and financial reporting quality," Business Strategy and the Environment, Wiley Blackwell, vol. 29(5), pages 2130-2143, July.

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