Integrated reporting and capital markets in an international setting: The role of financial analysts

TLDR

The study examines how integrated reporting influences capital markets by testing whether IR adoption enhances analysts’ earnings forecast accuracy. Using an international sample and voluntary disclosure theory, the authors assess IR’s impact on forecast accuracy while exploring how shareholder versus stakeholder governance moderates this relationship. Results show IR improves forecast accuracy more in North America than Europe and offer policymakers insights into effective disclosure practices.

Abstract

Abstract This study investigates the interplay between integrated reporting (IR) and capital markets. In particular, building on voluntary disclosure and information processing theories, we hypothesize and empirically find that IR adoption improves analysts' ability to make accurate earnings forecasts. Whereas previous studies focus on the South African context, we rely on an international sample that also allows us to study the moderating effect of the corporate governance regime (shareholder or stakeholder oriented). The results suggest that IR improves analysts' ability to make accurate predictions to a larger extent in North America than in Europe, and we derive interesting insights on the much‐debated nature of IR. This study offers valuable insights to policy makers interested in improving disclosure practices in the financial market.