Voluntary Disclosure of Integrated Reporting and cost of Capital in Brazil: an Alternative Explanation

Debora Ximenes de Aragao Vale Castelo (), Valcemiro Nossa (), Fabio Moraes da Costa () and Danilo Soares Monte-Mor ()
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Debora Ximenes de Aragao Vale Castelo: Fucape Business School, Brazil
Valcemiro Nossa: Fucape Business School, Brazil
Fabio Moraes da Costa: Fucape Business School, Brazil
Danilo Soares Monte-Mor: Fucape Business School, Brazil

New Challenges in Accounting and Finance, 2021, vol. 6, 1-15

Abstract: There is an ongoing debate about whether integrated reporting should be mandatory or voluntary. Empirical evidence mostly focused on South African mandatory disclosures, indicate that the firm’s information environment is relevant to explain the effects on the cost of capital. However, results based on voluntary disclosures indicate that the country’s level of enforcement explains the effects. This paper analyses the effects of voluntary disclosures of integrated reports on the cost of capital for Brazilian listed companies. Our design is developed to control the level of enforcement and evaluate if firm-specific characteristics may explain the effects on information asymmetry related to the disclosure of integrated financial and non-financial information. We collect data from 2014 to 2017 and compare the effects on capital cost for a group of firms that voluntarily disclose integrated reports with a control group identified via Propensity Score Matching. We can identify that larger firms, with stronger corporate governance and lower risk, are more likely to voluntarily disclose integrated reports. In our second stage, we find no effect on the cost of capital after the voluntary disclosure. Taken together, our results are aligned with prior studies focused on mandatory disclosures: the firm’s information environment is relevant to explain the potential capital market benefits of Integrated Reporting.

Keywords: Propensity Score Matching; Cost of Capital; Voluntary Disclosure; Municipalities of the State of Rondônia (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:bco:ncafaa::v:6:y:2021:p:1-15

DOI: 10.32038/NCAF.2021.06.01

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