The impact on the cost of equity capital in the effects of integrated reporting quality

Abstract

Integrated reporting is a new reporting tool that includes financial and nonfinancial information, which represents a natural evolution of the corporate reporting movement. Although this practice has gained increasing attention in recent years, both from an academic and professional perspective, the quality of the reports still represents a critical aspect due to inadequate investigation. Only a few studies have focused on integrated reporting quality, and contributions on the effects of quality have been even rarer. This study aims to investigate on the impact of integrated reporting quality on the firm's cost of equity capital, owing to the paramount importance of this parameter for firms and investors. Our results highlight that integrated reporting quality has a significantly negative association with the cost of equity capital, suggesting that integrated reporting quality represents an innovative way to reduce the cost of equity. To our knowledge, this is the first study that examines the relationship between integrated reporting quality and a firm's cost of equity.

Board characteristics and integrated reporting quality: an agency theory perspective

“…It represents a concept without inherent characteristics that enable a user to define its quality (Wallace & Naser, 1995). Therefore, in light of this, the disclosure quality represents a difficult concept to define (Vitolla, Raimo, Rubino, & Garzoni, ). Imhoff (1992, p.101) defined the notion of disclosure quality as an evaluator's “overall subjective assessment of the relevance, reliability and comparability of the accounting data produced by the reporting entity”.…”

“…Although integrated reporting is consistent with progress in financial and nonfinancial reporting, it cannot be considered a mere sum of these two types of reports. In fact, it represents the capacity of the companies to create value over time (Vitolla, Raimo, & Rubino, ). By showing the existing interconnections between nonfinancial and financial information, and among the six diverse capitals it contains, integrated reporting emphasises orientation to the future, conciseness, and strategic focus.…”

The role of board of directors in intellectual capital disclosure after the advent of integrated reporting

“…This study, using Stata, performs a regression analysis to test the relationship between board characteristics and ICDQ. Specifically, this study uses a cross‐section instead of a panel analysis due to the limited variability of the dependent variable over time (Vitolla, Raimo, & Rubino, 2020; Vitolla, Salvi, Raimo, Petruzzella, & Rubino, 2020). The following equation reflects the analysis model proposed by this study (with variables defined in the subsequent sections):…”

Measuring the Level of Integrated Reporting Alignment with the Framework

“…Jensen & Berg, 2012;Frías-Aceituno et al, 2014;Vitolla et al, 2019d) and the effects of integrated reporting (e.g. Lee & Yeo, 2016;Barth et al, 2017;Vitolla et al, 2019e).…”