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Effect of integrated reporting quality disclosure on cost of equity capital in developed markets: Exploring the moderating role of corporate governance quality

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  • Muhammad Arslan Iqbal
  • Md Abdur Rouf Sarkar
  • Majed Alharthi
  • Md Jahid Ebn Jalal
  • Md Naimur Rahman

Abstract

This study examines the relationship between integrated reporting quality (IRQ) disclosures, corporate governance quality (CGQ), and the implied cost of equity capital (ICC) in developed markets, focusing on Australia and New Zealand. The increasing adoption of integrated reporting and its potential implications for firms’ ICC motivates this research. Moreover, the study highlights the role of IRQ in mitigating information asymmetry between firms and investors, emphasizing the need for high-quality disclosures. Using a quantitative approach with panel data analysis, the research analyzes a sample of the top 174 companies by Standard and Poor’s market capitalization in Australia and New Zealand from 2018 to 2022, encompassing 870 observations post-IRQ implementation. Statistical methods, including fixed-effects, IV2SLS, two-step system-GMM, pooled OLS, and medium quantile regression, were applied to ensure robust findings. The results reveal a significant negative relationship between IRQ disclosure and ICC, with CGQ playing a moderating role in strengthening this association. Consistent with agency theory, the findings suggest that to reduce information asymmetry, firms issue more information which allows to reduce the cost of capital. Therefore, a more comprehensive firms’ reporting, including information about their strategy and risks, increases investors’ confidence, hence it may reduce the cost of capital. This study provides valuable insights for regulators and policymakers by emphasizing the importance of integrated reporting frameworks and robust corporate governance practices to promote transparency, reduce information asymmetry, and optimize capital allocation efficiency in developed markets.

Suggested Citation

  • Muhammad Arslan Iqbal & Md Abdur Rouf Sarkar & Majed Alharthi & Md Jahid Ebn Jalal & Md Naimur Rahman, 2025. "Effect of integrated reporting quality disclosure on cost of equity capital in developed markets: Exploring the moderating role of corporate governance quality," PLOS ONE, Public Library of Science, vol. 20(6), pages 1-26, June.
    • Handle: RePEc:plo:pone00:0324147
    DOI: 10.1371/journal.pone.0324147
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    References listed on IDEAS

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    1. Sumaia Ayesh Qaderi & Sitraselvi Chandren & Zaimah Abdullah, 2021. "Integrated reporting disclosure in Malaysia: regulations and practice," Journal of Financial Reporting and Accounting, Emerald Group Publishing Limited, vol. 21(3), pages 607-632, December.
    2. Suman Devarapalli & Lalita Mohan Mohapatra, 2024. "Impact of Corporate Governance Characteristics on Integrated Reporting Quality: An Empirical Analysis, Evidence from India," Indian Journal of Corporate Governance, , vol. 17(1), pages 9-32, June.
    3. Mohammad Enamul Hoque, 2017. "Why Company Should Adopt Integrated Reporting?," International Journal of Economics and Financial Issues, Econjournals, vol. 7(1), pages 241-248.
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