Does good corporate governance lead to increased integrated reporting quality?

Abstract

Integrated reporting has attracted much attention in the past few years. The purpose of this study is to explore the impact of corporate governance determinants on the quality of integrated report disclosures. More precisely, this paper studies whether certain corporate governance variables (board diversity, audit committee independence, shareholder rights, and free float) influence the way in which companies provide information about their materiality determination process. In this context, we investigate a non-balanced sample of 41 companies (110 firm-year observations) from Europe over a four-year period (2013-2016). The analysis reveals no impact of the above variables on IRQ. A possible explanation for this is the application of robust estimators, which reduces the explanatory power of the model. Nevertheless, this study partially fills the gap in the literature by providing empirical evidence on the impact of CG on IR disclosures in a region, which has received little attention so far. Furthermore, it alerts regulators, policy-makers, practitioners and firms’ executives in Europe to pay more attention to CG and IR reforms and enforcement as well as to increase institutional pressures regarding IR adaptation.