Is integrated reporting associated with corporate financing decisions? Some empirical evidence
ISSN: 1321-7348
Article publication date: 27 September 2019
Issue publication date: 4 October 2019
Abstract
Purpose
The emerging practice of integrated reporting (IR) has raised curiosity regarding how it impacts on firms and their stakeholders. The purpose of this paper is to examine whether a firm’s decision to provide integrated reports is associated with its financing decisions and whether financial reporting quality mediates the relationship.
Design/methodology/approach
A usable sample of 832 firm-year observations was employed based on a dataset drawn from companies listed on the Johannesburg Securities Exchange (JSE) for the period between 2009 and 2015.
Findings
The findings show that firms that provide integrated reports tend to have lower levels of leverage, and this effect is partially mediated through financial reporting quality. We further document that the partial effect of financial reporting quality on leverage is stronger for firms that provide integrated reports than is the case for other firms. The findings suggest that IR enables firms to employ equity financing, which is a more informationally-sensitive source of capital than debt financing.
Originality/value
This study is the first to document evidence suggesting that management can draw on IR in devising optimal financing strategy.
Keywords
Citation
Lemma, T.T., Khan, A., Muttakin, M.B. and Mihret, D.G. (2019), "Is integrated reporting associated with corporate financing decisions? Some empirical evidence", Asian Review of Accounting, Vol. 27 No. 3, pp. 425-443. https://doi.org/10.1108/ARA-04-2018-0101
Publisher
:Emerald Publishing Limited
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