Integrated reporting and earnings quality : The moderating effect of agency costs

Journal article


Obeng, Victoria A., Ahmed, Kamran and Miglani, Seema. (2020). Integrated reporting and earnings quality : The moderating effect of agency costs. Pacific-Basin Finance Journal. 60, p. Article 101285. https://doi.org/10.1016/j.pacfin.2020.101285
AuthorsObeng, Victoria A., Ahmed, Kamran and Miglani, Seema
Abstract

Prior studies have suggested a link between disclosure mechanisms and accounting information quality. They also report better quality information in the presence of higher transparency and clarity in disclosure mechanisms. We contend that voluntary integrated reporting (IR) as a disclosure mechanism has an incremental positive effect on accounting information and particularly the quality of reported earnings. Consistent with this argument, we find a positive relationship between voluntary adoption of IR practice and earnings quality. Furthermore, while voluntary adoption of IR is positively associated with earnings quality for firms experiencing high agency costs, the moderating effect of firm level agency costs have an insignificant effect on the relationship between voluntary IR practice and the level of integration. We find no evidence consistent with the proposition that managerial opportunism is relevant in shaping the effectiveness of IR practice for quality disclosure when a higher level of integration is achieved. Moreover, we find no evidence that firm complexity affects the relationship between IR practice and earnings quality. Overall, our findings are consistent with the view that IR wields an incremental positive effect on the quality of accounting information.

Keywordsintegrated reporting; earnings quality; agency costs; firm complexity
Year2020
JournalPacific-Basin Finance Journal
Journal citation60, p. Article 101285
PublisherElsevier B.V.
ISSN0927-538X
Digital Object Identifier (DOI)https://doi.org/10.1016/j.pacfin.2020.101285
Scopus EID2-s2.0-85079121040
Page range1-21
Publisher's version
License
All rights reserved
File Access Level
Controlled
Output statusPublished
Publication dates
Online04 Feb 2020
Publication process dates
Accepted03 Feb 2020
Deposited16 Jun 2023
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