Integrated reporting and board characteristics: evidence from top Australian listed companies

Abstract

PurposeDrawing upon agency theory, this study analyses the influence of board characteristics on integrated reporting (IR) for the top 50 companies listed on the Australian Securities Exchange (ASX50). Focus is placed on IR at the aggregate level as well as its separate components, namely Future Opportunities and Risks (FOPRI), Governance and Strategy (GOVSTR), Performance (PERF), Overview and Business Model (OBM) and General Preparation and Presentation (GPP).Design/methodology/approachA checklist is devised based on the IIRC (International Integrated Reporting Council) framework to track companies' disclosures for the period from 1st July 2014 to 30th June 2017. Regression analysis is used to investigate the determinants (board size, board independence, activity of the board, gender diversity, firm size, profitability and growth opportunities) of IR and its separate components.FindingsThe findings indicate a significant and positive effect of board independence on the aggregate IR index, FOPRI and GPP. A negative and significant association is found between activity of the board and both the aggregate IR index and its separate components, including GOVSTR, PERF and GPP. Additionally, the aggregate IR index is significantly related to firm size, profitability and growth opportunities.Research limitations/implicationsThe limited sample of 50 companies over three years is the main limitation of the study. The study suffers from an inherent limitation from the use of content analysis in assessing the level of IR. No checklist to measure the level of IR can be fully exhaustive. Furthermore, we focus on whether an item in the checklist is disclosed, using a dichotomous scale, thus ignoring the quality of information disclosed.Practical implicationsThe study has several practical implications. From a managerial perspective, it shows that having more board meetings harms the level of IR. The results can guide regulators, such as the Australian Securities and Investment Commission (ASIC) and the Australian Securities Exchange (ASX), when drafting new regulations/guidelines/listing rules. If regulators aim for a higher level of integration in the reports, they know which “triggers to pull” to attain their target. Our results can guide regulators to choose the appropriate trigger among various alternatives. For instance, if a higher level of integrated reporting is desired, size instead of profitability should be chosen. Finally, ASX listed companies can use our checklist as a scorecard for their self-assessment.Originality/valueThis research is the first to investigate IR by devising a checklist based on IIRC (2013) along with an additional GPP component in the ASX context. Using separate models to examine each component of the aggregate IR index is also unique to this study. The study also brings to the fore the role of gender-diverse boards in promoting IR. It reiterates the debate about imposing a quota for better gender representation on boards.

Sustainable corporate governance and non-financial disclosure in Europe: does the gender diversity matter?

“…A positive association has also been found JAAR 23,1 between board gender diversity and: IR disclosure quality (Vitolla et al, 2020); IR forward-looking disclosures (Kilic and Kuzey, 2018) and IR materiality disclosure quality (Gerwanski et al, 2019). Differently, Omran et al (2021), using a sample of 50 top listed firms in the Australian Stock Exchange from 2014 to 2017, have found no significant relationship between the presence of women on board and IR disclosure. They argued that women, being the minority gender in the boardroom, may not be able to convince their male counterparts to convey greater disclosures.…”

Environmental, Social and Governance (ESG) Committees and Performance in Thailand

“…This is because a larger board may become a hindrance to strategic initiatives and actions (Goodstein et al, 1994), and may contribute to a lack of unity in decision-making due to the dispersed options (Jensen, 1993). Moreover, Omran et al (2021) find no relationship between ESG board size and integrated reporting, because companies will disclose integrated information under the regulations no matter the board size. Therefore, to test the relationship between board size on ESG performance in Thailand, this study hypothesises that: It can be assumed that ESG disclosure and performance will be influenced by women on ESG board committees.…”

“…For example, Haji and Ghazali (2013) find a positive relationship between the frequency of board committee meetings and intellectual capital disclosure of listed companies in Malaysia. However, McMullen and Regunandan (1996) and Omran et al (2021) state that the frequency of board committee meetings have a negative influence on ESG disclosure. This may be because too many meetings can create a lack of unity in terms of decision-making, and the corporations need to spend more money on meeting allowances.…”

Corporate Secretary Professional Expertise and Annual Report Readability

“…Momtaz (2021) stated the results of his research that information asymmetry between management and investors causes agency costs that reduce CEO loyalty. Omran & El-Galfy (2014) and Omran et al (2021) stated that information asymmetry can practice of corporate governance, disclosure, and financial reporting of companies (Nowland et al, 2021;Peng et al, 2019). Financial Services Authority Regulation Number 35/POJK.04/2014 dated 8 December 2014 concerning Corporate Secretary of Issuers or Public Companies stipulates that every public company in Indonesia is required to appoint a company secretary carried out by the Board of Directors and reported to OJK and the Indonesia Stock Exchange.…”

“…Information asymmetry related to company performance can be overcome by signaling (Omran et al, 2021;Omran & El-Galfy, 2014). Namely, the company tries to convey information (signal) its performance through various ways, the most important of which is financial reporting and the disclosure of certain information to stakeholders.…”