Signalling power and value relevance of voluntary disclosures: in the era of integrated reporting

Ajay Lunawat, Krishnan Chandramohan, Dipti Lunawat and Sapna Malya

Asian Review of Accounting, 2025, vol. 34, issue 2, 298-315

Abstract: PurposeThe purpose of the study is to examine the signal impact and value relevance of voluntary integrated reporting (IR) in a unique regulatory setup where non-financial disclosures and/or sustainability reporting are mandatory.Design/methodology/approachWe employ a rich dataset of 2,575 firm-year observations spanning 331 unique Indian firms over eight financial years in our analysis. We assess the value relevance of IR by analysing its influence on stock price. To achieve this, we employ a model based on the widely used framework outlined by James Ohlson (1995).FindingsOur analysis indicates that the use of IR is perceived to be a positive signal. It results in a significant boost in market value as investors seem to be willing to pay a premium for IR firms. The initial adoption is assessed as a positive signal and is associated with an increase in the market value of the firm. The impact of continued commitment to the framework is also perceived as a positive signal. However, successive reports have a lower incremental impact on market value. While IR magnifies the impact of earnings per share on market price, it concurrently moderates the impact of book value per share through its interaction.Originality/valueTo the best of our knowledge, this is the first study to segregate the impact of the initial adoption of IR and the continued adoption of the framework. The study is also focused on a regulatory setup, which has a high mandatory non-financial disclosure regime, thus making the understanding of voluntary IR more profound and generalizable.

Keywords: IR; Voluntary disclosure; Value relevance; Signalling theory; Non-financial reporting; Sustainability reporting; India (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eme:arapps:ara-12-2024-0383

DOI: 10.1108/ARA-12-2024-0383

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