The idea behind the development of this special issue “The integrated reporting and corporate social responsibility: a new trend” originated with the organization of the International Conference on Contemporary Research in Accounting, Finance and Taxation (CRAFT 2019) held in Tunisia, on October 28–29, 2019.
CRAFT 2019 was organized by the Tunisian Association of Studies in Accounting, Finance and Taxation (ATEC2F) in collaboration with research unit FCF, the Faculty of Economic Sciences and Management (University of Tunis El Manar) and the Higher Institute of Finance and Taxation of Sousse (ISFF).
CRAFT 2019 has given researchers the opportunity to discuss recent issues in transparency in corporate reporting and to take advantage of relevant comments to create a better understanding of the topic related to corporate social responsibility (CSR) and integrated reporting (IR) becoming a key instrument in enhancing firm value.
We are very grateful to our keynotes speakers: Professor Khaled Hussainey (Professor of Accounting and Financial Management at the University of Portsmouth), Jean-Luc Rossignol (Associate Professor in Management Sciences at the University of Franche-Comté (2000–2016) and General Inspector of the Administration of National Education and Research [IGAENR], Ministry of Education and Ministry of Higher Education, Research and Innovation, France) and Professor Philippe Desbrieres (Professor of Management Sciences at the University of Burgundy).
In this special issue, selected papers focus on the determinant and consequences of the IR. They also deal with the importance of corporate social responsibility, notably CSR reporting and its relationship with tax avoidance, corporate governance and intellectual capital (IC). The special issue contains 16 research papers and two literature reviews.
Many studies reported that the relevance of mandatory financial reporting is increasingly challenged. Thus, firms need to improve their reporting system to reflect their ability to create value over time, enabling a more efficient and productive allocation of capital by fund providers.
A growing number of firms around the world increasingly devote a large part of their annual reports to disclose more information about several factors that affect their ability to create value over the short, medium and long term. Hence, several recent studies examine the level, determinants and impact of such disclosures. Therefore, it is important to investigate the impact and the challenges around CSR and IR. We consider that this topic is of great interest to managers, providers of capital, standards setters, investment analysts, rating agencies and researchers in the field.
Integrated reporting
In the first paper, Cooray et al. examine the extent and the trend of IR practice in Sri Lankan companies. In this study, the authors analyze the content of annual integrated reports over a period of three years. Empirical findings show that the adoption of IR in Sri Lankan companies progresses in line with the International Integrated Reporting Framework (IIRF). Hence, the results corroborate with the strategic and institutional perspectives of the legitimacy theory.
A number of authors attempt to examine the factors thought to be influencing IR. Erin and Adegboye test the effect of corporate attributes on the IR quality of firms listed inSouth Africa during the period 210–2018. They focus on three categories of attributes: board attributes, audit committee attributes and other firms’ attributes: age, profitability, size and growth. To assess IR quality, they rely on a content analysis. For this, they develop an IR checklist based on international IR guidelines.
Findings provide evidence that the three attributes group positively influence the IR quality. In addition to these firms’ attributes, authors highlight the important role of external assurance by Big4 auditor in enhancing IR quality.
Fernandes and Barbosa are interested in the Brazilian context. In their paper, the authors identify the determinants of the voluntarily disclosure of the integrated report during the period 2016–2019. They show that firms with high profitability and market-to-book ratio are more likely to adopt IR in Brazil. Regarding corporate board characteristics, they provide evidence that firms with more independent and gender diverse boards are more likely to adopt the IR.
The study of Hichri explores the relationship between corporate governance and IR in French listed firms for the period 2016–2019. She advances that the presence of audit committee and the proportion of women directors increase the IR.
Other papers are interested in the effect of IR. Mishra et al. explore how listed companies in India perceive the IR. The paper use two analysis methodologies. The first analysis is a qualitative one based on questionnaire-based survey of 431 nonfinancial companies. Their findings provide evidence that managers have a positive perception of the IR concept. Indeed, they consider that IR helps firms to have concise, effective and transparent reporting and to make better decisions.
Nakajima and Inaba choose to investigate the market reactions to voluntary IR in Japan. Using event study methodology, they confirm that the Japanese stock market reacts positively to voluntary IR publication. The positive abnormal returns are apparent in 2019 and 2015. In addition, they provide evidence that investors react more positively to environmental, social and governance (ESG) disclosure in integrated reports than to CSR reports. Hence, in the Japanese stock market, investors pay more attention to voluntary IR.
Taiwo et al. examine the effect of sustainable reporting on market value growth of listed Nigerian firms. They show interesting results using data from 2009 to 2018. They show that the sustainable reporting has no significant effect on market value growth. This finding is not surprising as the compliance level of the sampled firms to GRI is below average. Hence, the study recommends to listed firms to increase their efforts to comply with the sustainability reporting guidelines.
Finally, two studies present what we know about IR through a systematic literature review. Sushila and Parthvi advance a literature review based on papers published between 2011 and2020. They emphasize on three points:
the development of the IR concept across countries;
literature review of IR; and
the futures directions of research.
The study of Nwachukwu systematically reviews 17 papers published between 2017 and 2020. He focuses on theories related to determinants and consequences of IR.
Corporate social responsibility
Papers involved in this topic deal particularly with CSR and its relationship with several factors such as governance, tax avoidance and intellectual investment.
In the first paper, Hamza and Jarboui examine whether the disclosure tone management practice in sustainable reports influence the CSR. In other words, the paper examines if the corporate social responsibility is one of greenwashing strategies in French listed firms during the period 2010–2016. Findings indicate that firms with high corporate social responsibility commitment have low disclosure tone management. Hence, the management of socially responsible firms respect ethical and moral standards.
Abid and Dammak explore the relationship between corporate social responsibility and tax avoidance in the French context. Using data from nonfinancial listed firms, the results show that firms highly committed on corporate social responsibility strategy are more likely to engage in aggressive tax avoidance. Hence, corporate social responsibility is used as a hedging strategy against the potential consequences of aggressive tax avoidance practices. This association is more pronounced in firms audited by high-quality auditors, which supports Sikka’s view of “organised hypocrisy” act committed by firms.
The study of Kacem and Omri aims to investigate the effect of tax incentives on corporate social responsibility in the Tunisian context. Using data of 71 Tunisian firms during the year 2017, they show that tax incentives for CSR negatively affect CSR practices. Hence, tax incentive is not an effective tool to promote social activities in the Tunisian context.
Boshnak examines the determinants of corporate social and environmental voluntary disclosure practices in Saudi Arabia. Using data of nonfinancial listed firms over the period 2016–2018, the findings provide evidence that corporate social disclosure increases because of the implementation of new corporate governance regulations and IFRS. In addition, he confirms that disclosure practices are positively related to firm size, leverage, manufacturing industry type and government ownership. In contrast, family ownership is negatively related to corporate disclosure.
Bakry investigates the effect of IC efficiency on the corporate social responsibility in Egyptian firms over the period 2010–2018. He tests the three components of IC: human capital efficiency, capital employed efficiency and structural capital efficiency. The findings indicate that firms with more effective IC and human capital have higher corporate social responsibility performance. However, the structural capital has a negative effect on social performance.
Rosa et al. analyze the simultaneous effects of the disclosure regulation (nonfinancial information) and the factors driving in (no)environmental disclosure (ED) and the reduction of greenhouse gases (GHG) of listed Italian companies. The authors use structural equation modeling to investigate the cause–effect relationship between current legislation and the disclosure and nondisclosure of GHG information. Results show that regulation enhances ED. This relationship is reinforced by environmental liability. In addition, the findings provide evidence that firms that comply only with legislation do not include disclosure about GHG. They confirm that disclosure of environmental information enhances operating results and improves the relevance of this information to different stakeholders of companies.
The study of Chronopoulos focuses on how the CSR influences the management sales forecast accuracy in S&P 500 listed firms. Empirical findings advance that socially responsible managers commit forecast errors of lower magnitude, and the sales forecast accuracy is positively related to the level of CSR.
Suttipun and Yordudom assess the market reactions to ESG disclosure of top 50 listed companies from Thailand over the period 2015–2019. The study provides evidence that Thai investors consider ESG disclosures when they make investment decisions. Indeed, the findings show positive impacts of environmental and social disclosures on market reactions, while there was a negative impact of governance disclosures.
The final paper of Ghrab et al. aims to analyze the CEO compensation sensitivity to Tunisian firm performance. Using data over the period 2009–2015, the authors confirm that CEO compensation is not related to firm performance. Even after introducing CG mechanisms, the pay–performance relationship remains insignificant.
Overall, we expect that this special issue will contribute to a comprehensive understanding of CSR and IR, and their role in enhancing efficient allocation of capital. This will be of great importance to firms that need to know if a more consistent approach to corporate reporting effectively improves their value and support providers of financial capital in their decision-making. The issue will also be useful to regulators and policymakers in their effort to accelerate the adoption of IR across the world.
Finally, we thank the Emerald team and reviewers who provided their expertise and insight and contributed to and ensured the quality of the published manuscripts.
