The Economic Consequences of Integrated Financial reporting

In tandem with the upsurge in interest in IR in academia and practice, a seemingly endless academic research field has emerged over the past years. In an attempt to condense the variety of successively increasing knowledge on IR, a plethora of scholars have conducted reviews of the different facets of IR

The Economic Consequences of Integrated Financial Reporting: The Case of the Oil and Gas Sector in Egypt Nada Omar Ali Budapest Business School Supervisor Dr Győri Zsuzsanna 2021 Literature Review In tandem with the upsurge in interest in IR in academia and practice, a seemingly endless academic research field has emerged over the past years In an attempt to condense the variety of successively increasing knowledge on IR, a plethora of scholars have conducted reviews of the different facets of IR In general, Research on IR has focused on the role and objectives of this tool (Beattie and Smith, 2013; Beck et al., 2017; Brown and Dillard, 2014; Lodhia, 2015), on the main issues concerning the IR framework (Abeysekera, 2013; Haller and van Staden, 2014; Higgins et al., 2014), on the relationship between IR and non-financial disclosure (Adams et al., 2016; Sierra-Garcı´a et al., 2015) and on the effects of this practice (Barth et al., 2017; Garcı´a-Sa´nchez and Noguera-Ga´mez, 2017; Lee and Yeo, 2016; Mervelskemper and Streit, 2017; Vitolla and Raimo, 2018; Vitolla et al., 2019) A strand of research contributed to the debate from a critical perspective by pointing out the challenges and deficiencies in integrated reporting (Cheng et al., 2014; De Villiers et al., 2014; Adams, 2015; Flower, 2015; Dumay et al., 2017) Other researchers used interviews or surveys to gather information regarding the perception of various stakeholders (i.e company management, financial analysts, professional service firms, academics) on adopting integrated reporting (Higgins et al., 2014; Steyn, 2014; Stubbs and Higgins, 2014; Van Bommel, 2014; Atkins et al., 2015; Robertson and Samy, 2015; Burke and Clark, 2016; Perego et al., 2016; Rowbottom and Locke, 2016; Guthrie et al., 2017; Lai et al., 2017) Further, a strand of research examined the association between market reactions (i.e analyst forecast accuracy and firm valuation) with integrated reporting adoption and integrated reporting quality (Bernardi and Stark, 2016; Lee and Yeo, 2016; Garcia-Sánchez and Noguera-Gámez, 2017; Mervelskemper and Streit, 2017; Zhou et al., 2017) Another set of research initiatives explored the drivers for publishing integrated reports (Jensen and Berg, 2012; Frías-Aceituno et al., 2013; Garcia-Sánchez et al., 2013; Gianfelici et al., 2016; Rivera-Arrubla et al., 2017) Furthermore, a number of recent sources also provide a comprehensive overview of the development of and associated literature (e.g., Dumay et al., 2016; Perego et al., 2016; Velte & Stawinoga, 2016) Other research has indicated, but without direct engagement with investors, or other providers of capital, the potential usefulness of to that audience (see for instance Burke & Clarke, 2016; Eccles & Krzus, 2010; Eccles, et al., 2015; Perego et al., 2016; Setia, et al., 2015; Simnett, & Green, 2016) In contrast, some studies have been critical of raising questions as to its usefulness to investors (Flower, 2015; Rowbottom & Locke, 2016) In the current study, the literature related to the association between integrated reporting and Firm value, cost of capital and financial performance will be presented In addition to that the researcher will show the previous studies that discussed the incentive and disincentive of integrated reporting adoption Integrated Reporting and Firm value Based on Stakeholder theory that explains the accountability of the board of directors to both its shareholders and other interested parts This theory provides both social and economic values and a consideration of ethics and morality, which is essential for estimating the firm’s value (Freeman, 2004) Carnevale et al., (2012) illustrated important role of IR disclosure in developing the stakeholder theory, the IIRC Framework states that it is important to inform stakeholders with valuable information about organization’s financial and nonfinancial investments, for example debt or equity financing, manufactured capital like tangible assets, intellectual capital like intangibles and natural capital (IIRC, 2013; Eccles and Krzus, 2010) However, signaling theory indicating that organization can use profitability as an indicator for its stability and investment level, more profitable organizations seeking for more voluntary disclosure of information to be sent as a signal to the market, where the higher level of information disclosed might lead to more asymmetric information (Cahan et al 2016) Recently, public awareness about the importance of CSR disclosure as a way of evaluating the organization performance increased (De Villiers and Marques 2016; Cahan et al 2016) assessed the relation between the voluntary disclosure of organizations social responsibility (CSR) and firm value, they found that firm’s future cash flow increased as higher disclosure of CSR information that lead to lower discount rate as firm value incorporates both firm future cash flow and discount rate On the other side Cahan et al (2016) highlighted that the relation between CSR and firm value is a negative relation as firm value might decrease as CSR become more routine over time (treated as mandatory disclosure) Pavlopoulos, et al., (2019) contributed to the previous studies by focusing on the relationship between CSR disclosure, assurance and firm value for time period between (2007 and 2012) the study considered as primarily consulted in South of Africa, based on data collected by (KPMG), they presented six measures for CSR reporting where the first three variables measure trends of CSR assurance and the other three reflect CSR disclosures The results of the study contributed to the literature regarding the factors that might decrees the relation between CSR disclosure and firm value The following results had been reached by the study, first: the relation between volume and regulations of disclosure which is an important factor should be taken into consideration in the future research, as its most commonly known that the developed countries have higher rate of disclosure because of the higher restrictions of disclosure for listed companies than developing countries, second: the relation between CSR assurance and firm value is negative especially in organizations the not listed in SRI index, this result matching with Simnett et al., (2009) and Cahan et al (2016), who indicate that the significance of relation between CSR and firm value differs relative to the industry type, what is essential for one sector might not be important for the other one In the same context, some of previous studies which examined the correlation between IR and firm value are focused on South Africa, because it is the only country where IR has become a mandatory requirement for public-listed companies in Johannesburg Stock Exchange such as De Villiers, et al., 2016 Moreover, Lee and Yeo (2016); Simnett and Green (2017), and Barth,et al.,(2017) examine the link between IR and firm valuation They find evidence for a higher firm valuation of companies with high IR quality than companies that publish low IR quality reports Baboukardos and Rimmel (2016) examine the value relevance of IR by comparing the period before and after mandatory adoption in South Africa and find an increase of value relevance of the earnings valuation Hence, existing literature shows first insights of the value relevance and a positive association between IR and firm valuation In addition, Gul and Leung (2004) and Anton et al (2004) reported a positive influence of profitability on the amount of information voluntarily disclosed by multinational companies listed on the New York Stock Exchange and by listed companies in Hong Kong, respectively Frias‐ Aceituno et al (2013) confirmed this positive effect for integrated reports in their research According to Lee &Yeo (2016), there are two competing views on the association between IR and firm valuation , the first view is that a positive association between IR and firm valuation is expected should be deemed beneficial to investors Proponents of this view argue that integrated reporting improves the quality of information available to providers of financial capital to enable a more efficient and productive allocation of capital This suggests that IR mitigates information asymmetry between corporate insiders and external providers of capital and increases the decision usefulness for stakeholders.ِ Additionally, Barth et al (2017) added that IR as a tool that has potential to reduce parameter uncertainty and estimation risk due to the fact that IR intends to explain to providers of financial capital how a firm creates value over time in a concise manner by creating a holistic picture of the interrelatedness of the six capitals which a firm depends upon In contrast to the above, the second view expects firm valuation to be negatively associated with integrated reporting if integrated reports are non-beneficial to stakeholders This view is embedded in the theory of proprietary disclosure costs, which believes that it can be costly when proprietary information such as strategy, business models, opportunities and risks are revealed to competitors Then IR will negatively affect firm valuation (Lee & Yeo, 2016) Barth et al (2017) examined the relationship between integrated reports and firm valuation among firms listed on the JSE The EY excellence rankings scores were used to differentiate between high quality and low standard integrated reports A direct relationship was found between high quality integrated reports and liquidity Contrary to other studies, no association was found between integrated reports and the cost of equity capital Therefore, it is important to support IR regulators with studies guiding their decisions considering mandating CSR disclosure, IR and its effect on firm value, company performance and quality assurance, from the other point of view the relation between quality of accounting information and CSR disclosure and firm value is a considerable issue (Pavlopoulos, et al., 2019) IR and cost of capital The literature on the link between corporate disclosures and cost of capital such as Agnew and Szykman, (2005); Franco et al., (2015); Sengupta, (1998) provides a suitable starting point to establish an argument regarding the potential role of IR to reduce cost of capital Prior studies presents evidence of reduced cost of capital as one of the capital market effects of corporate disclosures (Healy and Palepu, 2001; Nahar et al., 2016) although some firm characteristics may attenuate (or accentuate) the effect of disclosures on reducing cost of capital (Botosan, 1997; Dutta and Nezlobin, 2017) Information provided through disclosures may translate into reduction in cost of capital through several ways First, Dutta and Nezlobin, 2017; Easley and O’hara, 2004; Lambert et al., 2007 discussed that corporate disclosures could reduce information asymmetries between the firm and its capital providers, which in turn reduces monitoring costs Through such an influence on the information environment of the firm, corporate disclosures could reduce investor’s uncertainty about a firm’s future cash flows and, hence, the risk premium they would demand to invest in securities of the firm Second, lower information asymmetry resulting from disclosures enables firms to attract increased investor demand for their securities, which in turn increases market liquidity and, hence, reduce their cost of capital (Diamond and Verrecchia, 1991; Verrecchia, 2001) Third, corporate disclosures could improve a firm’s information environment by enhancing analysts’ understanding of the firm’s prospects (Beyer et al., 2010) This line of reasoning suggests that IR would enable better prediction of the firm’s prospects and this reduces the likelihood of paying risk premium on debt Some recent literature shows that IR is positively associated with cost of capital (Baboukardos and Rimmel, 2016; Lee and Yeo, 2016) In the same context, according to De Villiers et al (2016), the firms that are in need for high credit facilities from lenders and creditors are more willing to have a higher level of compliance with the integrated reporting requirements Some empirical studies had also, reported a positive association between leverage and information disclosed in integrated reports (O’Sullivan et al., 2008; Aljifri and Hussainey, 2007; Wang and Hussainey, 2013) In this sense, it was anticipated that firms with higher leverages disclosed more information On the other hand, there were other studies reported negative and weak significance between leverage and information disclosed in integrated reports These findings suggested that highly leveraged entities disclose less information in integrated reports This result is consistent with that reported by Klỗ and Kuzey (2018) Moreover, empirical studies particularly those from South Africa, (Ernst & Young, 2014; Marx and Mohammadali–Haji, 2014; Baboukardos and Rimmel, 2016, De Villiers and Maroun., 2017) suggested that firms after the adoption of IR exposed sufficient information regarding the firms risk exposure, help firms to manage various types of risks, eliminating uncertainties and identify more clearly the investment opportunities, IR can be considered as signal to the market about the stability of the organization that impact positively on the cost of capital El Deeb (2019) According to BlackSun (2014), organizations that distribute integrated reports build a more grounded relationship and understanding with investors If voluntary corporate disclosures yield economic benefits, it is expected that firms will perform even better after adopting IR as integrated reports are guided by a structured framework with much emphasis on connectivity Integrated reports are superior to voluntary disclosures because they show connectivity between all sections of the annual report One of the likely benefits of a good relationship with investors will be a reduction in perceived risk In turn, this has the potential to reduce the cost of capital Therefore, Zhou et al (2017) investigated the impact of integrated reports’ level on the implied cost of capital and analysts’ estimates dispersion for all firms listed on JSE The study found a significant negative relationship between integrated reports’ level and the implied cost of capital and analysts’ estimates errors Furthermore, integrated reporting can be viewed as an innovative way to reduce the cost of equity capital Vitolla et al (2019) investigated the impact of IR on the cost of equity capital for 116 firms from different countries that had adopted the IR model The results showed a significant inverse relationship between the quality of IR and the cost of equity capital The decline in the cost of equity capital was ascribed to reduced information asymmetry due to improved transparency Similar to Baiman Verrecchia (1996) study that found that disclosures are capable of affecting the cost of equity, IR can help a firm to minimize forecasting risks and monitoring costs However, Richardson and Welker (2001) produced conflicting results regarding the relationship between disclosures and the cost of equity The researchers examined the effect of social disclosures on the cost of equity capital among a sample of Canadian firms The study reported the existence of a significant positive association between the cost of equity capital and social disclosures Ngcobo(2020) analyze 847 firm-year observations drawn from non-financial firms traded on the Johannesburg Stock Exchange, for the period between 2009 and 2015 The findings show that firms that provide integrated reports tend to have a lower cost of debt than those not provide IR The authors also find an inverse association between financial reporting quality and cost of debt, and that integrated reports accentuate this association The findings suggest that the debt market perceives value in the information presented in integrated reports beyond what is furnished in financial reports In contrast, Baboukardos Rimmel (2016) investigation of the difference in firms’ value prior to and post the adoption of the King III Report pointed to a decline in net asset value due to the adoption of IR One can thus deduce that it is possible for the cost of equity capital to increase as a result of adopting IR, depending on the nature of the new information and how the markets react to it These mixed findings are interesting to deep study among the reporting spheres of IR IR and financial performance Over the past three decades, a lot of studies have dealt with the relation between CSR and financial performance Waddock and Graves (1997) confirmed the correlation between CSR and financial performance of a business, using the return on assets (ROA), return on equity (ROE), and profit margin as performance benchmarks, corporate social performance index as the dependent variable, and total assets, total sales, number of employees, and debt relative to total assets as control variables Similar research was conducted by Weber et al (2008) However, they used ROA, ROE, profit before interest, taxes, depreciation (EBITDA), and total return on shares (TRS) for efficiency variables, while using the calculated GRI index as the independent variable The results confirmed that companies with good GRI indicators also had good efficiency indicators except for TRS, which proved to be non-significant Abreu, et al., (2017) also confirmed that companies that disclose their CSR information have higher financial performance, i.e., ROA, ROE, earnings before interest and taxes (EBIT), and EBITDA Chen, et al., (2015) came to the conclusion that it is highly likely that companies that have good GRI indicators will also have good financial results, but only in terms of ROE Sales growth and cash flow relative to sales have proven to be insignificant, which the authors attributed to the fact that profitable companies have additional sources of advancement for CSR Similar studies were conducted by Margolis et al in 2003, Allouche and Laroche in 2005, and Beurden and Gössling in 2008 Hence, Johari and Komathy (2019) proved that, in Malaysia, companies' sustainability reporting has a significant effect on performance, i.e., ROA However, there is little research on these interdependencies in the context of the implementation of the IR Framework Churet and Eccles (2014), in collaboration with RobecoSAM, have tried to prove that companies using integrated reporting will have better financial results As a measure of financial efficiency, they used Return on Investment Capital The correlation of the total sample was only confirmed within two sectors, health and information technology, but with a very small sample significance They attributed these results to the fact that integrated reporting is a relatively young concept Furthermore, in 2013, Eccles and Serafeim confirmed that companies with better financial performance were more likely to accept the idea of producing integrated reports, while in a survey conducted in 2011, they confirmed that companies with superior environmental, social and corporate governance (ESG) management also have much more transparent external reports focused on ESG issues contributing to better financial results Buallay (2019) proved that EGS, i.e., sustainability reporting has a significant positive effect on operational and financial performance in the European banking sector, while Adegboyegun et al (2020) proved that in the Nigeria banking industry IR only has a long-term relationship with corporate performance In the banking companies on the Indonesia Stock Exchange, Marita, et al., (2020) showed that element (a summary of external environmental organizations and companies) and elements (business model ) are an effect on the company performance While the other variables elements: elements ( governance ); elements ( risks and opportunities ); elements ( strategy and resource allocation ); elements ( performance ); elements ( outlook ); and elements ( Presentation and disclosure ), are not affect the company Performance This means not all components reporting integrated can affect the company performance The contribution of this research can inform related integrated reporting in detail and the value of the enterprise Turturea (2015) confirmed that integrated reporting helps companies achieve better financial results using only the report of one company (Novo Nordisk), while Appiagyei, et al., (2016) based the same conclusion upon South African and Australian companies By using 65 South African “Leading Practices” reports of the IIRC online database, Marrone and Oliva (2019) proved that companies' profitability, expressed through ROE, positively influences the level of compliance with the IIRC framework Dees (2019) proved a positive and significant relationship between the publication of integrated reports and long-term financial performance (Tobin’s Q) but insignificant relationship with short-term financial performance (ROA) Lopes and Coelho (2018) considered earnings as an important indicator of the ability to create value, and therefore used EBIT as a proxy in proving that firms with obligatory IR reporting are less profitable than those that it voluntarily Furthermore, Wen and Kiew Heong (2017) and Albetairiet al., (2018) investigated the content elements of IR, i.e., how the level of their disclosures influence financial performance Although through different results, both models proved the existence of a significant impact of the elements on ROA and ROE From other prospective, many researchers examined the relation between the integrated reporting and the performance of the company with the leverage level that is measured by the debt ratio De Villierset al (2016) indicated that there is a significant correlation between the integrated reporting compliance level and the leverage level of the company and he explained that by the need for the information by the external capital suppliers Iatridis (2012) and Annandale et al (2004) illustrated that the integrated reporting as an information system can help the management in mitigating many kinds of risks including the need for borrowing funds which have been measured in these studies through the debt ratio as a proxy for the leverage level On the other hand, some studies denied the influence of integrated reporting on performance (Hurghiș, 2015; Dube, 2017; Matemane and Wentzel, 2019; Sofian, 2019) The studies used variables for firm performance measurement, like ROA, ROE, earnings per share (EPS), firm's portfolios, Tobin’s Q, and economic value added For more explanation, Matemane and Wentzel (2019) who focused on secondary data obtained for the period 2010-2014, with some comparison to the period before IR was implemented, where secondary data was obtained from financial statements (2005-2009) and used for comparison purposes The results from the independent sample t-test, in the period before IR and after IR, showed that no statistically significant relationship existed between IR quality where and bank performance as measured in terms of Tobin’s Q (TQ), ROA, ROE Moreover, Jeroe (2016) examined the effect of IR and non-financial information on performance 44 firms across the world for 2012 and 2013 The study used return on asset and earnings per share as dependent variables and also used IR index, non-financial information disclosure index, firm size, risk as well as the market book value of the firm as independent variables twinned with the use of descriptive statistics and the POLS regression analytical technique, it was discovered that IR and non-financial information reporting has negative effect on firm performance In 2017, Suttipun explored the effect of IR on the financial performance of 150 firms between 2012 and 2015 in Thailand The study used TOBINQ as the endogenous variable and also used financial capital reporting index, manufactured capital reporting index, intellectual capital reporting index, human capital reporting index, social capital reporting index, environmental capital reporting index as well as size of firm as exogenous variables coupled with the use of correlation and multiple Least Square regression analysis, it was revealed that reporting of CSR issues as well as capital has positive effect on performance while environmental reporting has negative effect on performance In addition, Albetairi et al (2018) assessed the effect of IR on financial performance of five firms in Bahrain between 2012 and 2015 The study used business model index, risk and opportunities index, strategy and resource allocation index as well as performance disclosure index as indices of IR forming the explanatory variables while Return on Assets was used as explained variable coupled with the use of POLS regression technique, it was divulged that IR indices have mixed effect on firm performance to the end that risk and opportunities index as well as performance index exert negative influence on performance Incentives and disincentives of IR Since companies display considerable flexibility and discretion in providing voluntary disclosures (Healy, 2001, Adhariani and de Villiers, 2019), they decided the appropriate level of disclosure by comparing the benefits (e.g., lower cost of capital resulting from a reduction in information asymmetry) (Healy, 2001) and costs (e.g., revealing sensitive proprietary information to competitors) (Verrecchia, 1983; 1990) associated with the provision of information Hence, IR being mainly a voluntary disclosure initiative, the companies would display a cross-sectional variation in the provision of relevant disclosures In this context, the incentives and disincentives behind IR adoption is a critical consideration in most countries except South Africa, where it is a mandatory requirement ( Cooray et al., 2020) The review of prior studies showed that one reason for firms' voluntary engagement with IR is endeavors to benefit from capital market rewards However, it is reasonable to assume that firm decision ( not) to engare with IR is more multilayered one and rather is the result of the interplay of different strategic aspects A small stream of explorative-qualitative studies have dared an attempt to unfold the sense-making process of firms decisions for IR (dis)engagement In practical terms, extant studies shed light on different managerial perspectives of benefits of IR as well as its drawbacks in current reporting practice However, it can be advanced already that, although a variety of benefits and shortcomings are put forth in earlier literature and two studies come to the conclusion that managers are positively inclined to IR but, paradoxically, refuse to engage with it (Robertson and Samy, 2015; Adhariani and de Villiers, 2019), so far, no study conclusively answers the question as to which factors actually prevent firms from embarking on IR (Jannik,2020) In the recent articles, the qualitative inquiries with managers of large corporations reveal that IR is primarily seen as a business case that helps to achieve or increase legitimacy (Jannik,2020) Lai et al (2018), for instance, show that managers of an Italian insurance company use narratives in IR to reduce complexity and to increase attractiveness of external reporting, Thereby estiblishing a meaning dialogue with growing variety of ( primary financial) stakeholders (p.1381) For Australian IR adopters, Higgins et al (2014) argue that narratives help preparers to overcome prevailing challenges of IR, such as the nonavailability of standards In a survey in the South African setting, Steyn (2014) point out that managers regard IR as a strategic means to increase image and reputation but critically evoke internal deficits that complicate the generation of relevant data, as well as preparation costs Eccles and Saltzman (2011) state that IR is a crucial step to creating a more sustainable economic, social, and environmental society They see three main benefits of IR: internal benefits, through improving resource allocation decisions and better stakeholder engagement; external benefits, due to meeting the needs of investors that request nonfinancial information; and reduction of regulatory risks, through being prepared early if regulators require extra information.( Does the market value integrated reports) Arguelles, et al (2015) examine the benefits of integrated reporting for early adopters using an international sample They find that there is a stronger association between the degree of adherence to integrated reporting principles (constructed from Thomson Reuters’ Asset data) and market value of equity for early adopters of integrated reporting relative to non-adopters However, this result is not surprising as the majority of the early adopters of integrated reporting in Arguelles et al.’s (2015) sample are voluntary adopters In this respect, Lee and Yeo (2016) reported a positive association between the quality of IR in terms of the adoption of IIRF and the firm value measured by Tobin’s Q Further, Baboukardos and Rimmel (2016) reported that with the issuance of an integrated report, the value relevance of earnings increased Zhou et al (2017) showed IR provides incrementally useful information to the capital market over and above the existing reporting mechanisms Cosma et al (2018)also found that the stock prices of companies positively react to IR award announcements All these studies have been conducted in South Africa, where the adoption of IR is mandatory Similar findings are also reported in studies on the effects of IR adoption in a voluntary context Loprevite et al., (2018) found that the value relevance of accounting information is higher in IR-adopting companies than in non-adopters in the European Union In their study covering 57 countries, where IR is adopted voluntarily, Cortesi and Vena (2019) showed IR enhances corporate disclosure, reduces information asymmetries, and increases the quality of reported earnings per share On the other hand, Vitolla et al (2019)showed a positive association between IR quality and cost of capital based on a sample of 116 international firms engaged in IR Flores et al (2019) reported that, based on a study carried out in North America and Continental Europe, IR increases the analyst’s ability to forecast earnings This study also highlights that IR improves the analysts’ ability to predict earnings to a larger extent in North America than in Continental Europe owing to the shareholder-based corporate governance approach in the former compared to the stakeholder-based governance approach in the latter Further, Landau et al (2020) using a sample of 50 blue-chip companies in Europe, found that IR plays a role in the market valuation of a firm’s equity, where these findings indicate a negative impact on market valuation unless firms publish an integrated report with the assurance of a big four audit firm and prepare their report according to the newest GRI guidelines This finding is consistent with IIRC’s aim to provide information on how an entity can create and sustain value for the use of capital providers, who are considered the primary audience of IR Thus, the extant literature shows that the preparation of integrated reports, which combine all the material information of an entity, has contributed to improving the value relevance of corporate disclosures Turning to disincentives of IR adoption, in a UK survey with managers of FTSE 100 corporations, Robertson and Samy (2015) find that managers were aware and supportive of IR, but, paradoxically, had not engaged with it Although the different corporate motives articulated by the UK managers (e.g listing in social funds, corporate legitimacy, peer-pressure, providing accountability) strengthen the relevance of IR, most participants voiced reservations regarding its practical applicability, voluntary character and the absence of clear guidance, which jointly hamper its implementation and diffusion In addition, Chaidali and Jones (2017) unfold that FTSE 100 managers were suspicious of the motives behind IR, uncertain of its benefits and (the identification of) beneficiaries and complained about a lack of adequate guidance, preparation costs and report appearance These findings are reinforced in a survey by Adhariani and de Villiers (2019), who show that participants from Indonesia were interested in IR and regarded the new reporting medium as valuable in terms of satisfying shareholders and other stakeholders, but, potentially due to incurring preparation costs and the lack of both adequate information system infrastructure and stakeholder interest, were reluctant to implement IR in practice Moreover, Stubbs, et al (2014) provide some, although limited, investor-based evidence in their pilot study interviewing four Australian fund managers , notably all of whom were participants in the Australia Investor Network Whilst they found some support for greater alignment of business strategy with , they conclude that the benefits of to investors were “anticipated rather than actually being realised” (p 7) They also raised concerns regarding its wider use by investors due a lack of reporting consistency and comparability over time and between companies Additionally, they highlighted a perceived lack of wider understanding of IR and specifically the capitals model In a South African context, Atkins and Maroun (2014) find general support for integrated reporting; however, criticisms were also raised in relation to a lack of assurance, the need for a more comprehensive reporting framework and the need for its wider dissemination to, and engagement with, institutional investors In the same context, through a national online survey to individuals consuming financial information, Rensburg and Botha (2014) find that only a small number individuals use integrated reports as their main source of financial and investment information Moving to practice based evidence on IR, an ACCA survey (2013) based on 300 UK and Irish investors reported that 90% believed that “it would be valuable for companies to combine financial and non-financial information into an integrated reporting model [resulting in] an enhanced understanding of the long-term outlook of a company” (ibid, p 6) However, the report continued “that there remains some confusion over what IR can achieve and how it will work in practice” (ACCA, 2013, p 7) The ACCA (2013) survey also highlighted concerns regarding reporting clarity and its level of complexity and vagueness of objectives Finally, in a study funded by CPA Australia, Stubbs et al., (2016) explore the information needs of 24 company stakeholders and their perspectives on integrated reporting This sample includes one mainstream equity investor and six investment professionals with specific focus on ESG investments Stubbs et al., (2016, p 6) inter alia conclude that “investment stakeholders, did not perceive themselves as the intended audience” of this type of reporting Further, the mixed views on the usefulness of mostly brought into light a perceived lack of such usefulness” To sum up, although previous studies stated the benefits for IR, occasionally, in practical, IR (paradoxically) has been difficult to implement This conundrum demonstrates the necessity for a more fine-grained exploration of the question as to what are the motivations and challenges of IR adoption in the different contexts References Abeysekera, I (2013) A template for integrated reporting Journal of Intellectual Capital, 14 (2), 227-245 Abreu, R., Almeida, R., Lopez, J A P (2017) „Corporate social responsibility and performance: Evidence from the water industry“, New Trends and Issues Proceedings on Humanities and Social Sciences, Vol 4, No 10, pp 265–272 ACCA (2013) Understanding Investors: Direction for 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Abacus, 53, 94-132  ... disclosures and the cost of equity The researchers examined the effect of social disclosures on the cost of equity capital among a sample of Canadian firms The study reported the existence of a significant... significant impact of the elements on ROA and ROE From other prospective, many researchers examined the relation between the integrated reporting and the performance of the company with the leverage... between the quality of IR in terms of the adoption of IIRF and the firm value measured by Tobin’s Q Further, Baboukardos and Rimmel (2016) reported that with the issuance of an integrated report, the