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Integrated Reporting

Useful for investors?


Stefan Hannen

The introduction of Integrated Reporting (IR) is supposed to tackle shortcomings of corporate reporting that have been criticized for decades. The new reporting format intends to improve the understandability of corporate reports and broaden their often merely financial and backward-looking perspective. This study investigates the usefulness of IR for investors. A conceptual analysis provides an in-depth examination of the IIRC’s International Framework, the basis to prepare integrated reports. An empirical analysis examines the presence of IR in existing reports from South Africa and the USA, before testing potential consequences for the capital market. The findings have implications not only for investors, but also for the reporting firms, regulators and academics.

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3 Corporate reporting in South Africa and the USA


3    Corporate reporting in South Africa and the USA

This chapter presents the institutional and regulatory setting in South Africa and the USA. These two countries constitute a promising setting to examine the corporate reporting practice with a view to the use of IR, as they yield certain differences in various regards. With strong personal and institutional involvement in the IIRC and in the development of the International Framework, as well as with the introduction of the requirement to apply IR in the King III regulations, South Africa is a pioneer for the development of IR (Güleş (2014)). Stakeholder orientation and sustainability issues had already been established in the South African reporting environment by prior versions of the King rules (Rensburg/Botha (2014), p. 146). The perspective of corporate reporting was thus broader than that of traditional financial reporting, which makes the country an adequate setting for IR and thus for an empirical study on this reporting approach. As opposed to South Africa, the USA do not play a pioneering role in the development of IR. However, the USA have a developed and established system of (financial) reporting, which is considered to be useful for firms, investors and other participants in the economy.57 Contrary to IR, which puts a lot of weight on the firms’ individual situation, this system bases upon standardized reporting to a high degree, particularly driven by the different Forms that firms have to file with the SEC. Thus, it appears useful...

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