Does Integrated Reporting Enhance the Value Relevance of Information? Evidence from Sri Lanka

Thilini Cooray, Samanthi Senaratne, A. D. Nuwan Gunarathne, Roshan Herath and Dileepa Samudrage
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Thilini Cooray: Department of Accounting, University of Sri Jayewardenepura, Nugegoda 10250, Sri Lanka
Samanthi Senaratne: Department of Accounting, University of Sri Jayewardenepura, Nugegoda 10250, Sri Lanka
A. D. Nuwan Gunarathne: Department of Accounting, University of Sri Jayewardenepura, Nugegoda 10250, Sri Lanka
Roshan Herath: Department of Accounting, University of Sri Jayewardenepura, Nugegoda 10250, Sri Lanka
Dileepa Samudrage: Department of Accounting, University of Sri Jayewardenepura, Nugegoda 10250, Sri Lanka

Sustainability, 2020, vol. 12, issue 19, 1-25

Abstract: This paper examines the relationship between the level of integrated reporting (IR) based on the extent of adoption of the International Integrated Reporting Framework (IIRF) and the firm value (a proxy for value relevance of IR) in Sri Lanka, where the adoption of IR is a voluntary exercise. Using a comprehensive disclosure checklist, 117 integrated reports were content-analyzed, and then two regression models assessed the value relevance of IR disclosure. The study notes an increasing trend toward the adoption of IIRF in the preparation of integrated reports overall, as well as of each content element of IIRF. However, this rising trend has not significantly impacted the firm value by itself. Hence, this study’s findings do not support the enlightened stakeholder’s view on the subject of IR in Sri Lanka. Instead, it shows a significant positive relationship with the firm value when combined with the information on earnings (earnings per share), indicating that IIRF-compliant IR improves the value relevance of accounting information. This study offers insights for policymakers, professional accounting bodies, and practitioners on how investors make use of the information disclosed in integrated reports in their decision-making.

Keywords: enlightened stakeholder theory; firm value; integrated reporting; Sri Lanka; value relevance (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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