Measurement and Determinants of Integrated Reporting Quality in EU-listed Firms: Balanced Scorecard Perspectives

Nada Omar Hassan Ali (2024) Measurement and Determinants of Integrated Reporting Quality in EU-listed Firms: Balanced Scorecard Perspectives. PhD thesis, Budapesti Gazdaságtudományi Egyetem.

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Abstract

Integrated reporting (IR) is a growing corporate reporting tool that integrates financial and non-financial aspects, enhancing stakeholder engagement, decision-making, and risk management. So, the study's goals are to look at how EU-listed companies use integrated reporting (IR), suggest a new way to measure IR quality, and investigate the effect of characteristics of board directors, audit committees, free-floating shares, and the type of external audit firm on IRQ. To achieve these objectives, firstly, the researcher created a disclosure index based on the balance scorecard framework that reflects the information content of integrated reports based on the IR Framework's content elements, guiding principles, and fundamental concepts. Secondly, quantitative analysis was adopted to analyze the content of 147 integrated reports from 27 European Union countries from 2013 to 2020 using content analysis based on the constructed index (IRQBSC). Lastly, a multiple regression model was utilized. The analysis reveals that the adoption of integrated reports (IRs) in the EU generally improved from 2013 to 2020, although not all listed companies use the IR as a framework for non-financial reporting (less than 5% adopt IR). Additionally, the findings show that the quality of these reports has improved, but their IRQ remains moderate. Additionally, the results showed that firms prioritize financial and learning and growth information over internal or stakeholder data. Additionally, the results show that Spain, France, the Netherlands, Italy, and Poland are the top adopters of integrated reports. Moreover, the study found that IRQ is positively correlated with board size, independence, diversity, and meeting frequency, but not with board expertise. IRQ is also positively associated with audit committee size, independence, diversity, and frequency, but not with audit committee expertise. The analysis also found no significant association between IRQ and free-floating shares or external audits by Big 4 companies. These findings offer crucial theoretical, methodological, and practical insights and implications for various stakeholders (e.g., policymakers, investors, regulators) on the adoption status, quality status, and internal and external governance determinants of IR quality.