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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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4 Integrated Reporting in practice


4    Integrated Reporting in practice

Following the presentation of the IR Framework and the reporting landscape in South Africa and the USA, the two empirical parts of this study shall assess the potential of integrated reports to improve users’ decision making (research question 2). This chapter investigates the reporting practice in these two countries descriptively, aiming at an answer to the question in how far IR is present in firms’ reports. In line with the IIRC’s principles-based approach, this study interprets IR as the alignment of the reports with the Guiding Principles of the International Framework. This allows an assessment of IR presence in the reports, irrespective of whether they are named integrated reports and whether they are prepared in compliance with a requirement to apply IR (South Africa) or not (USA). Examining reports from two different years, 2006 and 2012, permits comparisons of the IR practice between the countries at two points in time and in each country over time, in particular before and after the release of King III in South Africa, which introduced the requirement for listed firms to apply IR or explain why they would not.

The chapter begins with an analysis of prior research on IR practice. Next, theoretical reasoning on the drivers of corporate reporting sets out the basis to derive hypotheses on the reporting practice in the two countries and years. After an explanation of the methodology for this study, which describes the sample and the...

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