Integrated Report Quality: Share Price Informativeness and Proprietary Costs

52 Pages Posted: 11 Jun 2021 Last revised: 10 Aug 2021

See all articles by Mary E. Barth

Mary E. Barth

Stanford University - Graduate School of Business

Steven F. Cahan

University of Auckland Business School

Lily Chen

University of Auckland Business School

Elmar R. Venter

University of Pretoria

Date Written: August 10, 2021

Abstract

Our study addresses whether integrated report quality, IRQ, is positively associated with greater price informativeness and the extent to which the greater price informativeness is diminished when firms have higher proprietary costs of disclosure. In integrated reports, firms integrate financial and non-financial information to explain how it uses financial, manufactured, intellectual, human, social and relationship, and natural capitals to create value. Financial statements and sustainability information are key to integrated reports. Based on firms in South Africa, which mandates integrated reporting, we find IRQ is significantly negatively related to synchronicity, and, thus, positively related to price informativeness. This finding indicates higher quality integrated reports enable investors to make more informed decisions and, thus, allocate capital more efficiently. All twelve IRQ components are negatively associated with synchronicity, eleven significantly so. Thus, most dimensions of IRQ, and integration of financial and non-financial information, including sustainability information, contribute to greater price informativeness. Synchronicity and IRQ are significantly less negatively related for firms with higher proprietary costs, particularly costs associated with growth opportunities and intangible assets. For firms with these costs, IRQ is insignificantly associated with synchronicity. Our study informs the rapidly changing standard-setting landscape for integrated financial and non-financial information, particularly sustainability information.

Keywords: integrated reporting, share price informativeness, proprietary costs, sustainability

JEL Classification: G12, G14, G2, M1, M2, M4, M41

Suggested Citation

Barth, Mary E. and Cahan, Steven F. and Chen, Lily and Venter, Elmar R., Integrated Report Quality: Share Price Informativeness and Proprietary Costs (August 10, 2021). Available at SSRN: https://ssrn.com/abstract=3857927 or http://dx.doi.org/10.2139/ssrn.3857927

Mary E. Barth

Stanford University - Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States
650-723-9040 (Phone)
650-725-0468 (Fax)

Steven F. Cahan

University of Auckland Business School ( email )

12 Grafton Rd
Private Bag 92019
Auckland, 1010
New Zealand

Lily Chen

University of Auckland Business School ( email )

12 Grafton Rd
Private Bag 92019
Auckland, 1010
New Zealand

Elmar R. Venter (Contact Author)

University of Pretoria ( email )

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