Does Multiple Capitals Disclosure Affect the Capital Market? An Empirical Analysis in an Integrated Reporting Perspective.

Yanqi Sun,Xin Qiao,Qiaoling Fang,Na Wu,Yi An

doi:10.3389/fpsyg.2022.837209

Abstract

Integrated reporting (IR), as a novel corporate reporting approach, focuses on how six forms of capital promote corporate value. This paper explores whether this kind of multiple capitals disclosure (MCD) framework has an impact on the capital market. Using a sample of Chinese A-share firms from 2012 to 2016, we examine the relationship between MCD quality and firm value. The results indicate that a higher MCD quality leads to a greater firm value. Our results are robust to a variety of sensitivity tests. Further evidence suggests that MCD quality could increase profitability by affecting the decision-making of non-financial stakeholders and enhance the value relevance of financial information by affecting the decision-making of investors. The paper helps understand how the IR approach affects the perception of investors on the value of a firm. The findings of the paper are of interest to academics, corporate management, investors, and governmental officials.

Highlights

Financial reporting and sustainability reporting are two major strands of current corporate reporting, but their isolated focuses limit their bigger role in helping decision-making of investors (Frías-Aceituno et al, 2013; Lodhia, 2015; Robertson and Samy, 2015)
Our paper examines the association between integrated reporting (IR) quality and firm value, using a sample of Chinese listed A-share companies
The results reveal that there is a significant and positive relationship between IR quality by Chinese firms and firm value, indicating the IR approach affects the pricing-decision making of investors

Summary

Introduction

Financial reporting and sustainability reporting are two major strands of current corporate reporting, but their isolated focuses limit their bigger role in helping decision-making of investors (Frías-Aceituno et al, 2013; Lodhia, 2015; Robertson and Samy, 2015). By emphasizing the integration of financial information and non-financial information, integrated reporting (IR) is often perceived to be a potentially useful tool to overcome such limitations of prior corporate reporting (Reimsbach et al, 2017). Such a major change in the information disclosure enables possibilities to better communicate with stakeholders, providing them with a holistic view of an organization concerning how multiple capitals of an organization contribute to value creation over time (Gutiérrez-Goiria et al, 2021). According to Silvestri et al (2017, p. 7), IR is “a more effective reporting approach because it focuses on value creation through the lens of the six forms of capital . . . rather than sustainability reporting’s focus on environmental and social impacts through the lens of stakeholder materiality.” IR is expected to promote sustainable business practices (Argento et al, 2019), and to help create a more sustainable world (Steyn, 2014)

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