Investigating the relationship between integrated reporting and firm performance in a voluntary disclosure regime: insights from Bangladesh

Md. Shafiqul Islam

doi:10.1108/ajar-06-2020-0039

Abstract

PurposeThe purpose of this study is observing the disclosure pattern of integrated reporting (IR) and investigating its relationship with a firm's operational, financial and market growth performance measured in the form of return on assets (ROA), return on equity (ROE) and market-to-book value ratio respectively in the voluntary disclosure regime of Bangladesh.Design/methodology/approachThis research is quantitative, based on a pooled-OLS regression analysis of 20 firms listed under ten different nonfinancial industries of the Dhaka Stock Exchange (DSE) for three financial years from 2015–2016 to 2017–2018, with 60 firm-year observations. A manual content analysis based on a structured integrated reporting disclosure index (IRDIN) measures the extent of disclosure in the corporate annual reports. The practical model consists of the dependent variable IRDIN and the independent variables ROA, ROE and market-to-book value ratio. The natural logarithm of total assets and financial leverage are the two controlling variables used in the model.FindingsThe findings deduced from the empirical results indicate that the IRDIN is positively and significantly related to all three performance variables. Content analysis shows an increasing pattern of disclosure of the constructed index elements by the sample firms.Research limitations/implicationsA Small sample size may deter the generalization of the research findings in other voluntary disclosure regimes. Self-constructed IRDIN index scores may be affected by subjective judgment while assessing the annual reports.Practical implicationsCapital market regulators can gain valuable insights regarding the suitability of implementing IR in Bangladesh as the results show a positive relationship of firm performance with the adoption of this revolutionary paradigm in corporate reporting.Originality/valueThis study adds value to the existing limited literature of IR disclosure and firm performance in Bangladesh by incorporating content analysis and regression analysis to understand how firms respond to the demand of value creation by the stakeholders in a voluntary disclosure regime. This study captures sample firms from all the nonfinancial industries of Bangladesh with a unique IR index, which is the first of its kind.

Highlights

Integrated reporting (IR) as a concept, a practice and an object of research endeavors has grown significantly over the last decade (Rinaldi et al, 2018)
As Bangladesh is moving toward a free-market economy and more of its listed companies are exporting quality products outside the country’s border, a growing interest has been observed by the stakeholders’ home and abroad about the nonfinancial performance of these firms
The models have shown an exciting pattern regarding the relationship of firm performance (ROA and return on equity (ROE)) and growth with the overall pattern of disclosure in the sample firms’ corporate annual reports

Summary

Introduction

Integrated reporting (IR) as a concept, a practice and an object of research endeavors has grown significantly over the last decade (Rinaldi et al, 2018). IR has gained significant attention from the C-suite managers of progressive companies worldwide (Kassai and Carvalho 2016). IR could be seen as a move away from the profound. Asian Journal of Accounting Research Vol 6 No 2, 2021 pp. The full terms of this licence may be seen at http:// creativecommons.org/licences/by/4.0/legalcode

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