The moderating effect of external financing on the relationship between integrated reporting and firm value in Egypt

Abdellatif Hussein Abogazia, Hafiza Aishah Hashim, Zalailah Salleh and Abdou Ahmed Ettish

Journal of Financial Reporting and Accounting, 2022, vol. 22, issue 5, 1380-1409

Abstract: Purpose - This study aims to investigate the moderating effect of external financing needs on the relationship between the disclosure level of integrated reporting (IR) and firm value using evidence from Egypt. Design/methodology/approach - This study uses a panel regression analysis for a matched sample of 50 companies listed on the Egyptian Stock Exchange (EGX), specifically from EGX100. The sample covers four years (2017–2020). The current study uses content analysis to measure IR and Tobin’s Q as a proxy for firm value. Findings - The findings reveal a significant positive relationship between the disclosure level of IR and firm value. In addition, the authors find that external financing needs moderate the relationship between IR and firm value. It is concluded that the higher the disclosure level of IR content, the higher the firm’s value, and that this relationship strengthens in firms with high needs for external financing. Practical implications - Several practical implications can be derived from the results of the current study. Policymakers and regulators can impose mandatory requirements for IR in Egypt. It also opens new insights for board members, managers, analysts and auditors in forming financing decisions based on annual reports. Originality/value - The present study has a novel insight from a developing country and significant contributions to the extant literature. The study provides empirical evidence from an emerging economy and an insight into how external financing can be used for firms with different levels of IR. It also provides a comprehensive disclosure index to estimate the level of IR.

Keywords: Integrated reporting (IR); Sustainability; External financing; Content analysis; Agency theory; Signaling theory (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jfrapp:jfra-05-2022-0195

DOI: 10.1108/JFRA-05-2022-0195

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