Value relevance of integrated reporting: a study of the Bangladesh banking sector
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ORIGINAL ARTICLE
Value relevance of integrated reporting: a study of the Bangladesh banking sector Pappu Kumar Dey1 Received: 4 September 2019 © Springer Nature Limited 2020
Abstract This paper aims to investigate the determinants of integrated reporting (IR) and its association with firm value and liquidity in the context of voluntary adoption. The data cover the period 2013–2018 of all banking companies of Bangladesh that construct 144 firm-year observations. An IR index is developed using international IR framework 2013, and content analysis is performed to measure IR adoption and practice. In addition to ordinary least squares regression, two-stage least squares method is used to minimize the endogeneity concerns. The result claims that banks with bigger board size, higher proportion of female and independent directors, and larger growth opportunity are more likely to adopt and practice IR. This paper documents that IR practice has a significant positive impact on the firm value, which is consistent with the theoretical prediction of corporate disclosure and firm value. Alternatively, the result does not suggest any conclusive evidence on the association between IR practice and stock liquidity. The findings of this paper could assist the regulators for preparing and issuing guidelines for this new reporting paradigm. This research, however, acknowledges the small firm-year observations and subjective judgment of self-constructed IR score. Keywords Bangladesh · Banking sector · Content analysis · Firm value · Integrated reporting · Stock liquidity
Introduction Conventional financial reporting concentrates on historical financial information and short-termism that fail to portray present economic consequences and implications, and prospects. Stakeholders, particularly investors and creditors, demand for high-quality, value-relevant, and timely information because of the challenging and complex business environment. The disclosures of both financial and non-financial information also ensure accountability and transparency of the management who is primarily responsible for the best utilization of the resources of capital providers. Moreover, voluminous and disjointed corporate disclosure is repeatedly criticized by the users (Zhou et al. 2017). Therefore, the form of corporate reporting is dynamically shifting over the decades. On this journey, integrated reporting (IR), the latest reporting framework, explores the new avenue of corporate reporting philosophy. It is promoted as a promising * Pappu Kumar Dey [email protected] 1
Department of Accounting and Information Systems, Jahangirnagar University, Savar, Dhaka 1342, Bangladesh
solution to the concerns and limitations of traditional financial reporting (Busco et al. 2019). IR aims to provide a concise and holistic report that mainly illustrates the plans for the future value creation of firm’s resources through articulating its strategy, business model, governance and performance specifically connecting six forms of capitals: financial, manufactured,
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