Integrated Reporting and Investor Clientele

Abstract

In this paper, I examine the relation between Integrated Reporting (IR) and the composition of a firm’s investor base. I hypothesize and find that firms that practice IR have a more long-term oriented investor base with more dedicated and fewer transient investors. This result is more pronounced for firms with high growth opportunities, not controlled by a family, operating in ‘sin’ industries, and exhibiting commitment to IR. I find that the results are robust to the inclusion of firm fixed effects, controls for the quantity of sustainability disclosure, and alternative ways of measuring IR. Moreover, I show that investor activism on environmental or social issues or a large number of concerns about a firm’s environmental or social impact leads a firm to practice more IR and that this investor or crisis-induced IR affects the composition of a firm’s investor base. Finally, firms that report more information about the different forms of capital or follow more closely the guiding principles as described in the IR Framework of the IIRC exhibit a more long-term oriented investor base.

Keywords: integrated reporting, sustainability, disclosure, short-termism, investor clientele, investor activism

JEL Classification: M4, G2, G3, M14