Mandatory integrated reporting disclosure and corporate misreporting
Journal of Applied Accounting Research
ISSN: 0967-5426
Article publication date: 11 June 2020
Issue publication date: 14 July 2020
Abstract
Purpose
This paper aims to enrich our understanding of whether mandatory IR adoption lures firm into misreporting or forces them to reduce it.
Design/methodology/approach
The empirical analysis is carried out based on the sample containing all publicly listed firms in South Africa. Many different rigorous econometric techniques are adopted to thoroughly evaluate whether corporate misreporting practices increase or decrease following the mandatory adoption of IR.
Findings
The empirical results reveal that mandatory IR disclosure results in a decline in the misreporting practices of firms. The authors further find that as firms increasingly comply with the IR guidelines, especially with the “Content Elements” and “Guiding Principles,” their misreporting levels decrease.
Research limitations/implications
This study has implications for a wide range of stakeholders, especially for regulatory authorities, international policymakers and regulators, as well as users of integrated reports of listed firms on the Johannesburg Stock Exchange (JSE).
Practical implications
Regulatory authorities should be aware of misreporting determinants to set adequate and fitting corporate reporting standards that restrict the opportunistic behaviour of managers and amend IR guidelines to make them more comprehensible for integrated report preparers, therefore improves the implementation of IR.
Social implications
This study sheds light on the current state and consequences of IR adoption in South Africa before and after the mandatory IR disclosure requirement, thus, international policymakers and regulators can refer to the critical aspects in our findings when considering whether to support IR mandatory adoption in their markets.
Originality/value
This paper sheds light on the emerging debate over the usefulness of IR and the necessity of mandatorily adopting this new reporting framework. In addition, by showing that the mandatory adoption of IR significantly reduces corporate misreporting practices, we also contribute to the literature on corporate misreporting behaviour.
Keywords
Citation
Hoang, T.G., Vu, T.K., Nguyen, H.T. and Luu, H.N. (2020), "Mandatory integrated reporting disclosure and corporate misreporting", Journal of Applied Accounting Research, Vol. 21 No. 3, pp. 363-382. https://doi.org/10.1108/JAAR-02-2019-0025
Publisher
:Emerald Publishing Limited
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