Fostering Stakeholder Engagement: The Role of Materiality Disclosure in Integrated Reporting

Abstract

This paper studies the determinants of materiality disclosure among International Integrated Reporting Council (IIRC) Pilot Program companies implementing the IIRC Framework. In other words, it studies which variables influence the way in which such companies provides information about their materiality determination process. In order to test our hypotheses we performed a number of statistical analyses on a unique hand‐collected dataset including IIRC and non‐IIRC Pilot Program companies for the 2012 and 2013 fiscal years. Our results indicate that industry and some firm‐level characteristics (board size and diversity) do play a significant role in the determination of materiality disclosure, whereas the legal environment in which companies operate does not. Also, we found that IIRC Pilot Program companies disclosed more information about materiality than their competitors that did not join the program. This paper provides interesting insights for policy makers (in particular, the IIRC) and extends previous academic literature on integrated reporting. Copyright © 2016 John Wiley & Sons, Ltd and ERP Environment

What does materiality mean to integrated reporting preparers? An empirical exploration

“…Previous studies focused on materiality predominantly explore the determinants of any disclosures provided about the materiality determination process. For example, some firm-level characteristics strongly orient the disclosure achieved through this process (Fasan and Mio, 2016), similarly to what already demonstrated with reference to the specific IIRC content elements (e.g. Melloni et al, 2016;Stacchezzini et al, 2016).…”

Board characteristics and integrated reporting quality: an agency theory perspective

“…Gerwanski et al () showed how gender diversity increases materiality disclosure quality in the context of integrated reporting, whereas Kilic and Kuzey () found that gender diversity is positively related to forward‐looking disclosures in integrated reporting. Fasan and Mio () have instead found an opposite result whereby the presence of women on a board reduces the materiality disclosure quality. In relation to foreign diversity, Frias‐Aceituno et al (2013a) highlighted the absence of associations between the presence of foreign members on the board and the adoption of integrated reporting, whereas, in relation to age diversity, Alfiero et al () found that older members have a negative effect on decisions to compile an integrated report.…”

“…Therefore, some researchers have extended the scope of these studies to integrated reporting. In this regard, some studies have analysed the impact of gender diversity (Alfiero, Cane, Doronzo, & Esposito, ; Fasan & Mio, ; Frias‐Aceituno et al, 2013a; García‐Sánchez & Noguera‐Gámez, ; Gerwanski et al, ; Kilic & Kuzey, ), whereas others examined foreign diversity (Frias‐Aceituno et al, 2013a) and age diversity (Alfiero et al, ). In relation to gender diversity, Frias‐Aceituno et al (2013a) found that the presence of women on the board favours the adoption of integrated reporting.…”

“…Other studies have analysed the effects of board independence (Fasan & Mio, ; Frias‐Aceituno et al, 2013a; Kilic & Kuzey, ; Stacchezzini, Melloni, & Lai, ). In this regard, Stacchezzini et al () showed that companies with less independent boards are more likely to provide information regarding sustainability actions than information related to sustainability performance within integrated reports.…”

Reporting on sustainable development: A comparison of three Italian small and medium‐sized enterprises

“…This different approaches to materiality may be also dependent upon internal characteristics of the organizations (Fasan & Mio, 2017) that are beyond the scope of this article. Monnalisa's reporting process selects the material elements according to relevance for the company and relevance for the stakeholders, whereas that of Dellas proceeds with a survey of the importance and prioritization based on economic, social, and environmental performance influence on stakeholder decisions.…”