Value Relevance of Integrated Reporting using a Novel Approach: Comparative Cross Country Evidence of Mandatory and Voluntary Implementers

Abstract

This thesis examines the value relevance of accounting information under integrated reporting (IR) in a comparative mandatory and voluntary setting. A meta review is conducted of all published work focusing on integrated reporting since 2011, which provides detailed insight into the gaps in the IR literature. Multiplicative log-linear model is used in measurement, which is a novel technique that mitigates the shortcomings of traditional value relevance models. The findings show that value relevance of summary accounting information increases after the implementation of IR in the mandatory setting. In the voluntary setting, market effect and the existing reporting paradigm effect the value relevance of accounting information under IR. If the market is large and existing reporting requirements are robust voluntary adoption of IR has minimal to no effect. However, in smaller markets with less rigorous reporting environment, adoption of IR does result in increased value relevance of accounting information. Compared to traditional models, the multiplicative model provides estimates that are more stable over time and shows better explanatory power. Overall, the findings of this thesis show that capital providers value the information content of IR under specific circumstances. This thesis contributes to the IR and value relevance literature by providing the first comparative cross-country evidence of the effect of IR in the change in value relevance of reported accounting information. It provides policy relevant input to the standard setters of IR by demonstrating the effect of IR in the decision usefulness of summary accounting information. The thesis further provides robust evidence of the efficacy of using the multiplicative log-linear model in measuring value relevance instead of the traditional linear additive models.