Is integrated reporting associated with corporate financing decisions? Some empirical evidence

• In Event: Financial Reporting--Quality

Abstract

As a recent innovation in corporate reporting, integrated reporting (IR) has raised intellectual curiosity regarding how it impacts on firms and their stakeholders. This study examines whether IR, financial reporting quality and the interplay of these two variables are associated with corporate financing decisions. Based on a dataset drawn from companies listed on the Johannesburg Securities Exchange (JSE) for the period 2009 to 2015, we find robust evidence that presence of integrated reports is negatively associated with leverage, after considering the effects of financial reporting quality. The findings suggest that IR enables firms to employ equity financing, which is a more informationally-sensitive source of capital than debt financing. We also document robust evidence that the de-leveraging impact of financial reporting quality is greater for firms that provide integrated reports than is the case for other firms. The findings suggest that management can draw on IR to further exploit the virtues (or eschew the shortcomings) of financial reporting quality in devising optimal financing strategy.

Authors

• Tesfaye Lemma, Towson University

• Arifur Khan, Deakin University

• Mohammad Badrul Muttakin, Deakin University

• Dessalegn Mihret, Deakin University