Corporate governance, external assurance and integrated reporting practices: empirical evidence from South Africa Open Access

Integrated reporting practice (IRP) has evolved rapidly since the International Integrated Reporting Committee (IIRC) was founded in 2010 (Rinaldi et al., 2018). The acceptance of integrated reporting is growing at an accelerated pace (Maroun, 2018). In 2010, South Africa was the first country to make it mandatory for companies listed on the Johannesburg Stock Exchange (JSE) to prepare and publish integrated reports on an annual basis (Haji and Anifowose, 2016). In recent times, studies have shown the importance of external assurance and corporate governance in enhancing the quality of IRPs of corporate organizations (Liao et al., 2016; Alshbili et al., 2019; Maroun, 2019). It is observed that placing assurance on integrated reports help in validating its credibility and enhancing stakeholders’ confidence. Corporate executives believe that disclosure of integrated reporting is a key driver of business value for stakeholders. Therefore, the role of corporate governance has been a major discourse in academic and professional literature, and will continue to receive attention due to the evolving issues relating to integrated reporting (Martínez-Ferrero and García-Sánchez, 2017; Sethi et al., 2017). More so, the oversight role of board-level integrated reporting committees has provided additional governance on integrated reporting information and disclosure.

The concept of integrated reporting is a brief report that encompasses pertinent information that is both financial as well as nonfinancial of an organization that leads to value creation from short to long term. Goicoechea et al. (2019) maintain that, outside the importance of publishing of Integrated Report (IR), companies will also profit from developing integrated thinking. The growing popularity of integrated reporting has opened up calls for the assurance of IR to boost the integrity and reliability of IR. Erin and Adegboye (2021) observed that integrated reporting that is externally assured is a critical communication tool for demonstrating transparency and also signifies effective governance mechanism for meeting stakeholders concerns. Pressures from stakeholders and the demands for more nonfinancial information have increased rapidly in recent years, and companies are expected to meet these demands. Furthermore, since stakeholders equally expect corporate entities to communicate how they deal with these nonfinancial issues, these entities are paying attention to integrated reporting in the form of reporting initiatives as a means of communicating nonfinancial issues in general (Liu et al., 2019).

External assurance serves as an essential tool in validating the credibility and reliability of integrated reports (Mushwana et al., 2024). It involves independent verification of reported information, particularly nonfinancial data, which is often subjective and complex to measure. Assurance practices help to bridge the gap between corporate disclosures and stakeholder expectations, enhancing confidence in the reported information’s accuracy and integrity (Arthur et al., 2017). In the context of integrated reporting, assurance extends beyond financial metrics to include economic, social and governance (ESG) performance indicators. This broader scope necessitates a multidisciplinary approach, where assurance providers possess expertise in accounting, sustainability and industry-specific issues. External assurance also complements corporate governance by holding organizations accountable for the quality of their disclosures. Empirical evidence suggests that assured integrated reports are more likely to meet stakeholder demands for transparency and accountability, thereby reinforcing the organization’s legitimacy and trustworthiness (Buallay and Al-Ajmi, 2020).

The growing value of integrated reporting has made stakeholders to request for IR to be assured (Maroun, 2018). However, integrated reporting assurance is currently not a regulated practice, so it is voluntary. Briem and Wald (2018) believe that many companies are voluntarily assuring their integrated reports for the benefits they derive from them, such as the enhancing the integrity and reliability of the information, risk minimization and reputational considerations. Although there are number of studies that have documented the development of integrated reporting, the extent to which corporate governance and assurance influence IRPs in the context of South Africa has been less prominent. The limited research that does exist focuses on the quality of integrated reporting while neglecting the subject of governance and assurance (Caglio et al., 2020; Erin and Adegboye, 2021). Also, in recent times, there has been a call for more research into how governance and assurance impact IRPs in South Africa (Maroun, 2019; Mushwana et al., 2024). This study responds to these calls on the need to explore the role of corporate governance and external assurance on IRPs in South Africa.

This study makes contributions to integrated reporting and governance literature. First, our paper provides original insight into the relationship between corporate governance, assurance and IRPs in a developing country with a focus on South Africa. This research fills the gap by focusing on interaction of corporate governance, assurance and IRPs in South Africa. Second, the study highlights the need for placing credibility on integrated reports through external assurance which improves the quality of nonfinancial reporting practices in South Africa. Third, the findings from this study brings to fore a rich and robust findings on IRPs from more institutional settings and environment in South Africa.

The study of integrated reporting has been predominantly dominated in South Africa; this could be due to the fact that all listed firms are required by the JSE to apply the King III rule to prepare integrated reporting (Maroun, 2017). Though, there is less or no research about the influence of South Africa’s adoption of integrated reporting on other countries in the region. However, there are few studies on IRPs conducted on few countries in Africa such as Nigeria, Kenya, Uganda, Tanzania and Ghana (Lauwo et al., 2022; Arthur et al., 2017; Erin et al., 2022). In all these studies, the role of corporate governance and external assurance is under-researched. Therefore, this study contributes to extant literature in the area of corporate governance, assurance and IRPs.

According to Maroun (2018), South Africa has been acknowledged for its leadership in advancing corporate accountability and governance reforms. The first King Report of 1994 served as a catalyst for the development of stakeholder-oriented corporate governance reports by listed companies in the country. The political, social and environmental challenges that the South African business environment faced led to the evolution of the King Report of 1994, and the second corporate governance code, known as the “King II Report,” was released in 2002. The King II framework incorporates ESG issues in corporate annual reports of South African firms. In the quest to meet the yearning demands of investors and large stakeholder groups, the release of King III came into force in 2009. The King III code of 2009 became the de facto requirement for listed firms in South Africa to prepare integrated reports [Johannesburg Stock Exchange (JSE), 2013]. The King III code emphasizes the need to further enhance the quality of nonfinancial reporting (Maroun, 2019). The code iterates the need for coherent reporting strategy for communicating the organization’s ability to create and sustain value in the short, medium and long term.

The South African Integrated Reporting Committee was established in 2010 with the goal of reinforcing the King III code. The committee is to ensure effective integrated reporting within the South African firms. This underscores the need for industry regulations to play a key role in defining the nature and extent of corporate reporting. The committee challenged South African firms to produce forward-looking information that will enable stakeholders make informed assessment of the economic value of the organization. Stakeholders today seek forward-looking information that will help them evaluate an organization’s overall economic value more skillfully. Consequently, integrated reporting is now a mandatory disclosure for companies that are listed on the JSE.

Corporate governance refers to how companies are governed and how managers are held accountable to the companies’ stakeholders (Mustafa et al., 2023). Moreover, the corporate governance system results from a series of interrelated attributes (Buckley, 2022), all of which are relevant to sound and good governance. Based on the idea that corporate governance refers to a series of overlapping mechanisms, corporate governance structure influences integrated reporting (Erin and Adegboye, 2021). How authority is divided and exerted within organizations is governed by the institutional structure known as corporate governance. Power is thus the fundamental concept in corporate governance (Zhan and Santos-Paulino, 2021). A system of legal rules known as corporate governance defines the organizations that have the power to control the most important business decisions.

Current research on corporate governance and IRPs is based on two theories (agency and stakeholder theories). Stakeholder and agency theories contend that companies must adopt a more sustainable and long-term value perspective because stakeholders are interested in a company’s sustainability elements to understand where the company invests and how it does business (Atan et al., 2018). For instance, the conservation of the natural environment, climate change and environmental effects brought on by a corporate activity could be among stakeholders’ environmental concerns.

According to agency theory, there is a particular link between shareholders and management that is marked by the existence of shared interests (Fama and Jensen, 1983). However, the interests of managers may not always coincide with those of other shareholders (Jensen and Meckling, 1976). As a result, companies produce integrated reporting to lessen this knowledge imbalance (Erin and Adegboye, 2021). In fact, integrated reporting, which includes nonfinancial information, enhances the information on the how organizations create value and lowers the information gap between a company and its shareholders (Buallay and Al-Ajmi, 2020). Literature suggests that IRPs have positive effects on brand loyalty and reputation, investors’ perceptions of risk and performance, lowering cost of capital and maintaining social acceptance, which results in higher sales, revenues and returns (Al-Qahtani and Elgharbawy, 2020; Olojede and Erin, 2021).

According to proponents of the stakeholder theory, the board functions as a body that supports and affirms the right of all stakeholders based on the choices and actions made by the organization. Based on stakeholder theory, the main goal of corporate governance is to act as a “vehicle for coordinating stakeholder interests” (Evan and Freeman, 1988 cited in Donaldson and Preston, 1995, p. 74). Corporate governance establishes platforms where stakeholders can present their arguments, mitigate the impacts of information asymmetry, and include a built-in enforcement to safeguard stakeholders’ rights (Donaldson and Preston, 1995).

Therefore, corporate governance is seen as “balancing act” according to the stakeholder theory model since all stakeholders, including advocacy groups, have a right to be heard. Stakeholder theory’s fundamental premise is that management uses corporate disclosure (integrated reports) as a tool to give information to diverse stakeholders (employees, shareholders, investors, public authorities and nongovernmental organizations [NGOs]). Calabrese and Manello (2021) also claim that businesses attempt to obtain legitimacy by sharing information of how organizations create value for its stakeholders. According to this concept, integrated reporting is seen as a way to handle and address the varied needs of the many stakeholders, especially those that are important or influential. An organization’s ultimate goal is to show that it lives up to the expectations of its diverse stakeholders (Chouaibi and Affes, 2021).

Arumona et al. (2019) define board size as the total number of directors serving on a board. Larger boards are often regarded as more effective due to their broader range of knowledge, skills and abilities, which enhance their capacity to oversee and guide organizational operations. A larger board also promotes corporate transparency, as it typically comprises members with diverse expertise, cultural backgrounds and perspectives, thus improving problem-solving capabilities. Despite these advantages, empirical studies have reported mixed findings regarding the relationship between board size and integrated reporting. While it is argued that larger boards may bring greater diversity of opinions and perspectives, this relationship is also influenced by a firm’s complexity, including its industry and size (Erin and Adegboye, 2021). For instance, Kumar et al. (2022) found no significant impact of board size on the IRPs of banks. Similarly, Albitar et al. (2020) observed an insignificant relationship between board size and integrated reporting in their study.

Drawing from these divergent perspectives, this study hypothesizes the following:

Board independence refers to the proportion of independent directors relative to the total number of board members (Arayssi et al., 2020). According to stakeholder theory, greater board independence minimizes conflicts of interest among stakeholders, thereby encouraging management to prioritize long-term value creation (Jamil et al., 2020). Similarly, agency theory posits that independent directors, by virtue of their objectivity, are better positioned to assess management’s performance and ensure that board procedures are effectively supervised (Olojede et al., 2020). Proponents of stakeholder theory further argue that boards with a higher proportion of independent directors are more likely to provide stakeholders with accurate and high-quality information.

Independent directors are generally expected to enhance board effectiveness (Albitar et al., 2022). Their presence can foster greater transparency and openness, thereby encouraging management to adopt practices that align with stakeholder interests (Mnif and Borgi, 2020). However, alternative perspectives challenge this assumption. For example, Pucheta-Martínez and Gallego-Álvarez (2020) argue that board independence does not necessarily improve the quality of integrated reporting, a view also supported by Khan et al. (2021).

Based on these considerations, this study posits the following hypothesis:

The experiences and backgrounds of female board members play a significant role in shaping their involvement in strategic decisions, including those related to IRPs (Manita et al., 2018). Business outcomes are often influenced by diverse psychological characteristics, capabilities and backgrounds (Kyaw et al., 2017; Uwuigbe et al., 2019). Lagasio and Cucari (2019) assert that gender diversity positively impacts a company’s willingness to provide high-quality information, with the presence of female board members enhancing transparency and disclosure practices.

Research further highlights inherent differences in leadership traits between men and women. Men are often characterized by agentic qualities, whereas women are more commonly associated with communal attributes (Rouf and Hossan, 2020). These communal traits, including a focus on the welfare of others, enable female directors to better address stakeholder interests compared to their male counterparts, who are generally more focused on shareholders and economic objectives (Vitolla et al., 2020). Gender diversity on boards has been shown to promote balanced decision-making, as women bring unique perspectives that differ from those of men (Bakar et al., 2019). In addition, female directors tend to adopt leadership philosophies that prioritize employees, environmental sustainability and community welfare, often demonstrating a stronger commitment to social issues (Al-Shaer and Zaman, 2016).

Based on these insights, this study posits the following hypothesis:

The corporate experience of board committee members can be evaluated by examining their industry expertise, with more seasoned directors bringing significant knowledge and skills to nonfinancial reporting matters (Anderson et al., 2004; Velte and Stawinoga, 2020). Erin and Adegboye (2021) find a positive and significant relationship between a board member’s professional background and the effectiveness of a company’s sustainability initiatives.

Wahid (2019) argues that board members with substantial industry experience are better positioned to elevate the quality of corporate disclosures and focus on long-term value-enhancing strategies. However, contrasting evidence exists. For instance, Sandhu and Singh (2019) found no significant relationship between the average age of board members and corporate social responsibility (CSR) or integrated reporting disclosures. Their findings suggest that younger board members, compared to older executives, are more likely to support contemporary business practices, such as integrated reporting and CSR initiatives.

Given these divergent perspectives, this study proposes the following hypothesis:

The presence of an audit committee significantly enhances the effectiveness of financial and voluntary disclosures, thereby improving the quality of integrated reporting (Beske et al., 2020; Le and Nguyen, 2022). Appuhami and Tashakor (2017) found that, in the Australian context, the size of the audit committee positively influences the extent of integrated reporting. Similarly, Al-Shaer and Zaman (2018) investigated the impact of audit committee size on the credibility of integrated reports in the UK and reported a positive association with the quality of disclosures. Consistent with these findings, Al-Najjar (2020) also observed a positive relationship between audit committee size and integrated reporting quality.

Based on these insights, we propose the following hypothesis:

Agency theory posits that the inclusion of independent directors on audit committees helps mitigate information asymmetry. Independent audit committee members are more objective and possess greater autonomy in evaluating an organization’s performance, leading to enhanced governance outcomes (Chebbi and Ammer, 2022). Al-Najjar (2020) further highlights that audit committees with a higher proportion of independent directors are associated with improved organizational performance. Research also indicates that audit committees with significant independence uphold the integrity of both financial and nonfinancial reporting. For instance, Braam and Peters (2018) demonstrate that independent audit committee members positively influence the quality of integrated reporting. Similarly, Buallay and Al-Ajmi (2020) assert that the independence of audit committee members contributes significantly to enhancing the credibility and reliability of integrated reports.

Based on these perspectives, we propose the following hypothesis:

Olojede et al. (2020) emphasize the importance of audit committee members with financial expertise in enhancing the quality of integrated reporting. Similarly, Arumona et al. (2019) argue that the educational background of audit committee members plays a critical role in ensuring robust nonfinancial disclosures. The caliber of board members, reflected through their financial experience, education, and professional background, significantly impacts their effectiveness in overseeing complex reporting requirements. However, Mushwana et al. (2024) highlight that professional experience alone is insufficient to address the multifaceted challenges of integrated reporting. Their findings suggest that a combination of financial education and professional experience positively influences corporate strategic decision-making and business outcomes. Furthermore, educational diversity has been shown to enhance corporate effectiveness, as supported by psychological studies (Olojede et al., 2020). Arumona et al. (2019) also note that the educational background of corporate executives directly affects strategic decisions, which, in turn, influence corporate disclosure and performance.

Based on these insights, this study proposes the following hypothesis:

The frequency of audit committee meetings plays a critical role in influencing an organization’s reporting mechanisms (Aggarwal and Singh, 2019). Regular meetings enhance the transparency of integrated reporting, as they provide opportunities for committee members to stay informed and proactively address disclosure-related issues (Al-Shaer and Zaman, 2018). During these meetings, audit committee members can effectively monitor corporate disclosures and ensure their alignment with regulatory and stakeholder expectations (Karamanou and Vafea, 2005). Empirical studies have established positive correlations between the frequency of audit committee meetings and various aspects of corporate reporting. For instance, Goodwin-Stewart and Kent (2006) found that frequent meetings are associated with broader audit scopes, while Chariri and Januarti (2017) and Sultana et al. (2015) reported links to improved nonfinancial transparency and accounting prudence, respectively.

Arif et al. (2021) further demonstrated that frequent audit committee meetings significantly enhance the quality of integrated reporting when assessed using the IIRC framework. The reliability and effectiveness of an organization’s operations and reporting processes are also positively influenced by the regularity of these meetings (Olojede and Erin, 2021). Similarly, Kılıç and Kuzey (2019) observed a strong positive relationship between meeting frequency and voluntary disclosure practices, while Frías‐Aceituno et al. (2013) highlighted its significant contribution to improving integrated reporting quality.

Based on these findings, we propose the following hypothesis:

There are few studies on assurance and integrated reporting in literature. The study of Elaigwu et al. (2022) examine the effect of external assurance on integrated reporting quality of Malaysian firms. Their conclusion shows that external assurance positively influenced the quality of integrated reporting. Similarly, the study of Braam and Peters (2018) evaluated the role of external assurance on corporate integrated performance of selected firms in Europe and North America. The study observed that firms that integrated reports are externally assured has better corporate integrated performance than firms without external assurance. Without much ado, it is believed that integrated reports that are externally assured add credibility to the value of those disclosures, which invariably enhances the confidence of stakeholders.

The study of Caglio et al. (2020) investigates the role of assurance in enhancing the credibility of integrated reporting. The study highlights that assurance services significantly enhance the credibility of integrated reports. By involving external assurance providers, companies can substantiate the reliability and accuracy of the information disclosed, thereby increasing stakeholder trust. The authors argue that regulatory bodies might consider mandating assurance for integrated reports to ensure uniformity and higher standards of reporting across industries. Overall, the study provides robust evidence that assurance plays a crucial role in enhancing the credibility and informational quality of integrated reports. By doing so, it fosters greater stakeholder trust and potentially leads to more sustainable business practices. The research underscores the importance of developing standardized assurance practices to fully realize these benefits.

Similarly, the study by Bhatia et al. (2023) examines the link between assurance and integrated reporting, focusing on emerging markets. Their research highlights the role of assurance in enhancing the credibility and reliability of integrated reports. Firms that have their integrated reports assured tend to be viewed more favorably in the market. Assurance adds a layer of credibility that can positively influence investor confidence and potentially lead to better financial performance. The study found that companies with assured reports often enjoy a lower cost of capital, as investors perceive lower risk. The study emphasizes the importance of assurance in integrated reporting, especially in emerging markets, by providing a framework for enhanced credibility, improved quality and better market perception.

To further bridge the gap in literature on the emerging themes of assurance and integrated reporting and disclosure. This study will add to existing discussion on the role of assurance in IRPs of corporate firms operating in South Africa. This will further enhance discussion on the relationship between external assurance and nonfinancial reporting practices, especially in this period of ESG.

This study examines the effect of corporate governance and external assurance on IRPs of sampled firms in South Africa. Since this was a quantitative study, the ex post facto research approach served as the foundation for our analysis of the variables. Examining the cause-and-effect link between the independent and dependent variables is one of the features of the ex post facto research approach. Also, there are quite a number of studies that used ex post facto research method when examining the relationship between dependent and independent variables in integrated reporting studies (Erin and Adegboye, 2021; Olojede et al., 2023). This study is based on balanced panel data, the rule of thumb for balanced panel data is that the number of observations, should 100 observations and above. In our study, we have 3,010 observations, which qualifies the study to run regression analysis based on balanced panel data (Badi and Baltagi, 2008).

With a stratified sampling method, firms were grouped into different sectors, specifically from nine sectors. We derive a total sample of 301 firms based on companies that have available information during the sampled period. Information on integrated reports is extracted from annual reports and corporate websites of the selected firms. Similarly, data relating to corporate governance (board characteristics, audit committee characteristics and other related variables) were collected from companies’ annual reports. We assume that reporting of specific features conveys evidence of the quality of integrated reporting. These specific features include; integrated reporting committee affiliated with the board of directors, which can be viewed as an important control instrument to ensure the consistency of the engagement process with stakeholders and to expand the range of integrated reporting, provision of an independent assurance report can improve the quality of reporting and mitigates the concern of stakeholders and will improve the quality of the reports when an audit professional provides assurance (Al-Shaer and Zaman, 2016; Al-Shaer, 2020).

The population of this study is made up of 354 companies with a public listing on the JSE as at 2022 from nine different sectors (see Table 1) to which the provision of the JSE regulation applies. The JSE is among the top exchanges worldwide on market capitalization. The reason for selecting JSE-listed companies was because of the JSE regulation that requires publicly listed companies to publish their IRs annually or to explain their noncompliance. Additionally, JSE-listed companies are amongst those that control a substantial amount of the economy of South Africa. Therefore, the listed companies are more than likely to deliver a satisfactory picture of IRPs (Haji and Anifowose, 2016) as well as integrated reporting assurance practices. Given the probability that JSE-listed companies are likely to assure their IRs because they have the resources, the population was limited to JSE-listed companies.

Publicly listed companies on the JSE are mandated to publish IRs annually since 2010 or to explain their noncompliance. Mindful of this regulatory requirement along with the growing calls for the assurance of IRs (De Villiers et al., 2014; Haji and Anifowose, 2016; Maroun, 2018; Briem and Wald, 2018), this study examines the influence of corporate governance and external assurance on IRPs of 301 companies listed on the JSE. The sample was selected from JSE listed companies over a period of ten years from 2013 until 2022. The reason for choosing this period was stirred by the fact that JSE listed companies have been publishing integrated reports since 2010 as well as the expectation that the companies are likely to have adopted the practice of assuring their IRs. According to Haji and Anifowose (2016) and Erin and Adegboye (2021), JSE-listed companies are amongst those that control a substantial amount of the South African economy and are possibly likely to deliver a clear picture of IRPs. The study included companies from different sectors therefore the sample consisted of 301 companies. The companies were selected based on the availability of the IRs of the companies for the period of the study (2013–2022).

Companies that did not publish an IR for any year falling within the period of this study were excluded. To ensure that the data were comparable, only reporting companies were selected for the period under study (2013–2022). It was important for this research that the carefully chosen companies remained listed on the JSE for the period of the study. The reason for this was that this would ensure consistency, reliability and comparability of the data. If a company was delisted during the period of the study, then the company was excluded from the sample.

IRP which is the dependent variable in this study is measured using a scoring scale of 0–4 (see  Appendix 1). Following prior studies on integrated reporting (Al-Shaer and Zaman, 2016; Al-Shaer, 2020), this study uses categorical variables based on the identified benchmark. This benchmark scores 0–4 for assessing the quality of IRPs. The scores for the IRP are 0 = no integrated report exist; 1 = integrated report exist; 2 = where integrated report exists and the firm has integrated reporting committee affiliated with the board of directors; 3 = integrated report exist and the nonaudit firm (consultant) provides assurance; 4 = integrated report exists and assurance is provided by one of the Big 4 or other audit firms. These scores of 0–4 are used to judge the quality of information disclosed in the integrated reports. We further consider two alternative measures for the IRP for robustness analysis using a dichotomous variable. In this light, we consider the assurance level based on whether integrated reporting is verified by an audit firm.

This study evaluates the connection between corporate governance and IRPs. As discussed in the literature review, we measured corporate governance using both the board and audit committee attributes. The variables for board include board size (measure by numbers of directors on the board) (Olayinka et al., 2019), board independence (measured by the proportion of independent directors to the board) (Erin et al., 2022), board gender diversity (measured by the proportion of female directors to the board) (Olojede et al., 2020) and board experience (measured by the number of years of committee service) (i.e. committee members with five years of experience and above) (Arumona et al., 2019). See  Appendix 2 for more information.

We also use audit committee as measurement for corporate governance, which is in line with previous corporate governance studies (Appuhami and Tashakor, 2017; Adegboye et al., 2022). We measure audit committee using (i) audit committee size (measure by numbers of directors in the committee) (Olojede and Erin, 2021); audit committee independence (measured by the proportion of independent directors in the committee) (Buallay and Al-Ajmi, 2020); audit committee meeting (measured by the number of audit committee members meet in a year (Haji and Anifowose, 2016).

To control for other variables, we use four conditioning information sets based on prior studies that have examined integrated reporting studies. The disclosure of integrated reporting may be impacted by behavioral characteristics. We take into account:

• firm age (i.e. the number of years the firm has been listed on the stock exchange) (Haji and Anifowose, 2016);

• leverage (i.e. long-term debt divided by the book value of the equity) (Chariri and Januarti, 2017);

• firm size (the natural logarithm of total assets) (Haji and Anifowose, 2016); and

• industry type (we use the industry codes to proxy the industry type).

In light of the IRP measurement as earlier mentioned, it is necessary to note that when ordinary least square is used with the categorical or binary variable, it can be used to describe the linear probability model. However, the residuals (i.e. errors) from the linear probability model violate the homoskedasticity and the normality of errors assumptions of ordinary least regression that could result in invalid standard errors and hypothesis testing.

Therefore, this study uses the ordered logistic regression model to estimate relationships between an ordinal dependent variable and a set of independent variables. We adopt a five-scale ordinal variable to indicate the quality of IRP (i.e. “Poor,” “Low,” “Average,” “Above-Average” and “Excellent”), which indicate the level of IRP. For robustness analysis, we then use probit analysis.

To test the formulated hypotheses, we use the following model:

Model 1 (Board attributes and IRPs):

where IRP = integrated reporting practices; BSIZE = board size; BINDP = board independence; BDGDIV = board gender diversity; BEXP = board expertise; LEV = leverage; IND represents industry; FSIZE = firm size; FAGE = firm age; _i = the number of firms used in the study; and _t = the number of years selected for the study (2013–2022).

Model 2 (audit committee attributes and IRPs):

where IRP = integrated reporting practices; ACSIZE = audit committee size; ACINDP = audit committee independence; ACEXP = audit committee expertise; ACMEET = audit committee meeting; _i = the number of firms used in the study; and _t = the number of years selected for the study (2013–2022).

In this study, the dependent variable was analyzed using the ordered probit regression. An ordinal dependent variable and set of independent variables are analyzed using an ordered probit model. A variable that is categorical and ordered is called an ordinal variable. Examples include the terms “Poor,” “Low,” “Average,” “Above-Average” and “Excellent,” which describe the level of IRPs used in this study (see  Appendix 1). This estimation approach is suitable given the aforementioned range of 0–4 for this study’s dependent variable.

Additionally, we use the logistic regression method to analyze how well ASSURANCE and integrated reporting procedures work together. Also, to analyze ASSURANCE as a mediating variable, we use dummy variable set, we attached one (1) if integrated reports are externally assured and zero (0) if otherwise. We used the variance inflation factor (VIF) to account for correlated variables (see  Appendix 3). When explanatory variables in a regression model are correlated, multicollinearity problem emerges. Fitting the model and interpreting the findings may be challenging when there is a high amount of correlation between the variables. Regression model collinearity is evaluated using the multicollinearity test. The VIF is used to accomplish this.

Table 2 shows the summary statistics of the selected variables, including the percentage distribution of the IRP. The percentage frequency of each category that influences the IRPs is displayed in Panel A. Panel B shows the percentages of firms that externally assured its integrated reports while Panel C shows the summary statistics of all variables.

Panel A shows that 783 (26%) observations have integrated reports and maintain integrated reporting committees, compared to 722 (24%) observations with integrated reports but no integrated reporting committee and 0 (0.00%) observation with no integrated reports. It means all the selected firms have either standalone integrated report or integrated report included in their annual reports. The findings show that 517 (17%) observations have integrated reports and assurance from Big 4 or other audit firms, while 993 (33%) observations have assurance from a nonaudit firm. External assurance (ASSURANCE) is an additional metrics to evaluate IRPs quality as shown in Panel B.

Panel C of Table 2 displays descriptive statistics for the analyzed variables. The IRP has a mean value of 2.152. This suggests that the sampled South African firms are performing at an average level; it means IRPs is at moderate level. Considering other variables, the BSIZE shows a maximum of 15 directors and minimum of 6 directors, the average number for BSIZE falls between 8 and 9. While for BINDP, an average of four independent directors are represented in the board. It indicates that 48% (4.103/8.592) of the board is made up of independent directors. The result of the BINDP shows that most of the selected firms comply with the International Code of Corporate Governance recommendation that at least 25% of the board should be independent directors. This compliance could have accounted for the increase in IRPs of these firms. It is clear that the female directors (BGDIV) ranges from one to four on the board with a mean of 2.271, while the average level of board expertise (BEXP) is 9.542. This means on the average, the board members have at least nine years of business and financial experience.

Considering the audit committee variables, the result of audit committee size (ACSIZE) shows that an average of eight members, while audit committee (ACMEET) typically meet at least three times in a year to discuss issues relating to financial and nonfinancial disclosure matters. In addition, the result of ACINDP shows an average of three independent directors are represented in the committee. It indicates that 35% (2.783/7.912) of the board is made up of independent directors.

Table 3 provides the summary of the IRP scores for the 10-year period (2013–2022) examined in this study. The average/mean score of the IRP increased from 1.321 in 2013 to 1.442 in 2014. In the same vein, the mean score increased from 1.582 in 2015 to 1.614 in 2016. Similarly, an increase from 2021 (2.719) to 2022 (2.984). The overall mean for the 10-year period stands at 2.231 (see Table 2). This upward trend in the IRP demonstrates a positive steps by South African firms towards compliance with integrated reporting. However, there is still need to do more to comply fully with integrated reporting and disclosure.

Table 4 shows the correlation coefficients of the variables in question. As observed, the BSIZE is positively related to IRPs. The same is observed for other explanatory and control variables except for firm size which shows a positive but not significant. The positive relationship between BSIZE and IRP suggests that board size has positive influence on the IRPs. Also, the result documents a positive association between BINDP, BGDIV and IRP. This implies that effective and strong board has a direct influence on IRP; this means board member are making management accountable with respect to disclose issues relating to integrated reporting. All the audit committee variables show a positive correlation with IRP. Overall, the variables used to measure corporate governance have a positive relationship with IRPs. It is also established that there is no multicollinearity issue since no variable is greater than the benchmark of 0.5.

The findings from the empirical analysis are presented in this section. The relationship between corporate governance and IRP is reported in Table 5. Importantly, Panels A and B are included on each table. Six specifications are presented in Panel A, with columns 1–3 reporting findings without control variables and columns 4–6 presenting estimates with control variables for robustness testing. Estimates in Panel A could be interpreted in terms of the sign of the coefficients based on the properties of the variables used and the regression specification models. While Panel B calculates the marginal effect. The direction of the coefficients and the marginal effects at the mean, which gauge the likelihood that IRPs would be of higher or lower quality based on elements of corporate governance, which allow us to simply comprehend the results.

In this context, we establish the baseline coefficient in Table 5 Panel A as follows [¹]. The result shows BSIZE (0.3222***) has significant impact on the IRPs of the sampled firms. Similarly, (BINDP) (0.5421**) and (BGDIV) (0.4242**) have significant impact on IRPs. In the same vein, BEXP (0.4523**) and ACSIZE (0.7071***) do have significant influence on the IRPs. All other variables have positive and significant impact on IRPs except firm age (FAGE) which has positive but not significant impact on IRPs.

The marginal effects at mean for the overall model are reported in Panel B of Table 5. An increase in board size (BSIZE) is linked to a 28% (0.2821**) increase in the IRPs while for (BINDP), there is a likelihood increase of 52% (0.5239***) on IRPs. An increase in the proportion of female directors (BGDIV) is associated with an increase of 45% (0.4569*) of IRPs while BEXP shows an IRP of 34% (0.3429**). The audit committee size (ACSIZE) has IRPs of 5% (0.051*). Three of the control variables (FAGE, LEV and IND) have significant impact on IRPs.

In conclusion, this study considers eight hypotheses of how corporate governance influences IRPs. As a result, we attempt to establish a theoretical justification for the relationship between corporate governance and IRPs by drawing on agency and stakeholder theories. The first hypothesis focuses on the relationship between the IRPs and the size of the board (BSIZE). The findings show a significant relationship between board size and IRPs. Thus, we accept H1. The outcome is in line with earlier research on integrated reporting literature (Briem and Wald, 2018; Chebbi and Ammer, 2022). This demonstrates how a strong board can enhance the quality of disclosures. This conclusion supports the notion that an effective board can persuade management to disclose pertinent information regarding integrated reports (Erin et al., 2022).

H2 focuses on the relationship between the independence of the board (BINDP) and IRPs. The outcomes show that there is significant relationship between IRPs and board independence. Hence, we accept H2. While some studies (Erin and Bamigboye, 2022; Olayinka et al., 2019) hold that an independent board has a beneficial impact on company disclosures, the conclusion is consistent with studies of Arumona et al. (2019). H3 investigates the association between IRPs and the gender diversity of the board (BGDIV). The findings show a strong correlation between IRPs and board gender diversity. This result collaborates earlier research of Goicoechea et al. (2019), Hassan and Guo (2017). H3 is thus accepted. Furthermore, the analysis of board expertise has significant influence on IRPs. This means that when it comes to disclosing relevant information about integrated reports, the board’s financial experience is important. This finding adds to previous research on the impact of board experience and education on nonfinancial reporting practices (Arumona et al., 2019).

H5 deals with the relationship between the audit committee size and IRPs. The findings reveal a robust relationship between audit committee size and IRPs. This highlights the significance of audit committee size in the overall process of integrated reporting. This supports the claims of Erin et al. (2022) and Olojede et al. (2023) that audit committee size play a crucial role in determining the credibility and transparency of integrated reports. Therefore, H5 is accepted. The link between audit committee independence and IRPs is predicted by H6. The results of the audit committee independence demonstrate that independent members of the audit committee could actively participate in issues related to business operations, such as corporate reporting. As a result, audit independence is likely to influence high-quality disclosure. This finding confirms previous research on the function of the audit independence in relation to integrated reporting as concluded by Arumona et al. (2019). Therefore, H6 is accepted.

H7 considers the association between audit committee expertise and IRPs. It is accepted that audit committee members with financial experience would contribute positively to both financial and nonfinancial reporting practices of any organization. Therefore, H7 is accepted. Finally, H8 considers the relationship between audit committee meeting and IRPs. The findings show a positive relationship, this implies that audit committee effectiveness demonstrate that members of the audit committee actively participate in issues related to business operations, such as nonfinancial reporting disclosures. As a result, regular audit committee meetings will probably lead to high-quality integrated reporting since there will be more opportunities for them to discuss nonfinancial reporting related issues. This finding confirms the research of other scholars (Maroun, 2019; Erin and Adegboye, 2021). H8 is therefore accepted.

The results above have significant implications for corporate reporting especially for nonfinancial reporting disclosures. A quick look at both the corporate governance attributes and audit committee attributes reveal that they have a considerable impact on the IRPs of sampled South African firms. Our results support the hypotheses that corporate governance has impact on IRPs. Particularly, the findings demonstrate that both internal and external actors contribute to IRPs. In analyzing the results, our findings also align with the agency and stakeholder theories. It is acceptable for firms to disclose value-relevant information about their corporate operations and strategies since they are constrained by social contracts within their environment. However, for this to happen, it is necessary to disclose information relating to integrated reports. Additionally, to assess the credibility of integrated reporting, the role of stakeholders (regulatory agencies, executive management, staff, NGOs, investors and the external environment) is necessary in this regard (Deegan, 2007).

Stakeholder theory accentuates an organization’s accountability and the rights of stakeholders (Olojede et al., 2023). IRPs aim to enhance accountability and stewardship (IIRC, 2021). Management is required by the stakeholder theory to report information to stakeholders. Integrated reporting recognizes the importance of reporting on more than just the financial information and encourages a long-term sustainable orientation that will benefit corporations and stakeholders (Dienes et al., 2016). Martínez-Ferrero and García-Sánchez (2017) confirm that value-relevant information is a response to stakeholder pressure and that companies tend to be more proactive in their decision to provide assurance to all stakeholders.

Stakeholder theory deals with the relationship between an organization and its stakeholders. This made it more suitable for this study because it addresses how corporate entities demonstrate their commitment and loyalty to various stakeholders. Management of these entities is required to report information to stakeholders. Stakeholder theory is considered more relevant to this study than other theories because it addresses the concerns of all parties that has direct and indirect interests in corporate organizations.

In conclusion, our findings show that corporate governance variables have a considerable impact on IRPs of selected firms in South Africa. According to Erin and Olojede (2023), business entities disclose value-relevant information to prove their legitimacy and live up to societal expectations. Additionally, this study supports the stakeholder theory because assurance and internal factors (board and committee attributes) are both subsets of stakeholders which have impact on IRPs. By focusing on South African corporate setting, our study broadens the body of research on the topic of IRPs and corporate governance in developing nations. Overall, our findings show that South African firms’ IRPs has improved as a result of the strong corporate governance. Businesses participate in quality disclosure to demonstrate their legitimacy and meet the expectations of stakeholders and society. This work adds to the body of knowledge on corporate governance, assurance and IRPs in developing countries with a focus on South African firms.

We use ASSURANCE, as a dummy variable with a value of 1 if integrated reports are externally assured and 0 otherwise. Table 6 shows the outcomes of assurance and integrated reporting validated by independent experts. The outcomes are just marginally different from the established baseline findings in Table 5. Table 6 shows that companies with larger boards (BRCSIZE) are more likely to have higher-quality of integrated reports due to assurances from independent and external professionals. Similarly, board integrated reporting committee members with financial experience (BRCEXP) also have positive impact on the quality of integrated reporting.

The results in Table 6 support the role of external assurance as a driver of IRPs. This implies that regulation by itself is insufficient to raise the quality of integrated reporting. External verification of integrated report is necessary to support regulators efforts given the current debate among policymakers, standard-setters and other stakeholders over what influences the quality of integrated reporting (Mushwana et al., 2024). Although assurance may not be necessary, it could be a tool for boosting stakeholders confidence. Al-Shaer (2020) believe that external validation of corporate disclosure, such as integrated reporting, enhances organizational legitimacy among larger stakeholders.

The findings of this study emphasize the importance of corporate governance vis-à-vis its impact on IRPs. Our findings further highlight the need for external assurance in ensuring the quality of integrated reports by firms. External auditors must independently certify integrated reports for them to be credible and reliable. The study’s overall findings reveal that the selected South African firms have shown commitment to disclosure of integrated reports. Regulatory agencies, policymakers and standard setters must also advocate for an effective corporate governance to promote quality integrated reports disclosure in corporate annual reports.

In Table 7, we exclude the financial companies since they are sensitive firms and operate under a stricter regulatory regime. We then provide a robust analysis of nonfinancial firms, so as to know whether the results could have effect on the overall findings. Table 7 Panel A shows the baseline regression. The result shows that BSIZE (0.5632***) has significant impact on IRPs. Similarly, (BINDP) (0.339**) and (BGDIV (0.235**) have significant impact on IRPs. In the same vein, BEXP (0.138***) and ACSIZE (0.463**) do have significant influence on IRPs. Almost all the control variables have significant impact on IRPs. This result suggests that firms operating in the nonfinancial services industry have taken the issue of integrated reporting disclosure with all seriousness it deserves.

Also, examining the marginal effects of Panel B in Table 7, the results show that almost all the variables have significant impact on IRPs. The board size (BSIZE) shows a 12% (0.1272**) increase in the quality of integrated reporting, while for (BINDP), there is a likelihood increase of 19% (0.189***) for high integrated reporting. An increase in the proportion of female directors (BGDIV) is associated with an increase of 45% (0.455**) of IRPs while ACSIZE shows an excellent IRPs of 26% (0.259**). The four of the control variables (FSIZE, FAGE, LEV and IND) have significant impact on IRPs.

The results of this study can benefit corporate leaders, policymakers and assurance providers and highlight the significance of comprehensive governance structures and external assurance in the improvement of integrated reporting quality. Such measures also have the potential to change the economic and commercial realities by promoting transparency, accountability and trust. South Africa’s use of integrated reporting is a valuable case study for other developing economies looking to bring their corporate reporting into compliance with global standards.

From the analysis conducted in the study, it provides the understanding of how corporate governance mechanisms: board size, board independence, gender diversity, audit committee characteristics help in enhancing IRPs for South African firms. This will enable companies to enhance their governance systems and have higher responsibility and commitment in relation to integrated disclosures. The resultant economic consequences of integrated report could lead to improved investor confidence in the firms, and encourage both domestic and foreign investment. This can reduce the cost of capital for firms, but also improves the financial performance of the firms. Integrated reporting of a high quality improves the stakeholder recognition and the image of customers and regulators improve the competitive position of the firm in the market.

Similarly, the findings point out that external assurance helps improve the credibility and reliability of integrated reports. Firms with assured reports are more likely to meet stakeholder demands for transparency and accountability. Essentially, external assurance results in reduction of perceived risks by the investor and creditors hence improving the image of companies (Maroun, 2018). This can in turn make significant financial savings such as with borrowing costs. Assurance acts as a signal of credibility, helping firms strengthen their market position and align with global standards, thereby facilitating international trade and collaborations.

The study underscores the need for policymakers and regulatory bodies to establish mandatory guidelines for integrated reporting and external assurance. South Africa, as a pioneer in integrated reporting, can lead by example in advocating for more stringent standards. Mandating external assurance for integrated reports can stimulate the audit and consulting industries, driving job creation and economic activity. Uniform standards can reduce information asymmetry in the market, improving efficiency and fostering a level playing field for companies. To align with the theoretical aspect of this study (stakeholder theory), there is need for enhanced stakeholder involvement in the reporting process to address the expectation gap between companies and their stakeholders. Regulators can facilitate forums or platforms for stakeholder engagement, ensuring that reporting practices meet broader societal and environmental goals. Engaging stakeholders can help companies tailor their reporting practices to align with consumer preferences, enhancing brand loyalty and market share.

This study examines the impact of corporate governance and assurance on the IRPs of selected firms in South Africa. We used corporate governance variables to assess the level of IRPs of the sampled firms. Using a sample of 301 firms from 2013 to 2022, the level of IRPs was found to be significantly influenced by corporate governance characteristics using the ordered and probit logistics regression methods. The additional analysis demonstrates that the level of IRPs of South African firms is impacted by external assurance. The results of this study add to the emerging research on IRPs at the corporate level in South Africa.

Considering the result of this study, it can be concluded that research on IRPs of corporate entities in South Africa is an emerging field of research. However, there is growing discipline in the private sector entities towards IRPs among practitioners and policymakers. There is need to put proper governance structure in place to harness the potentials of practitioners in these entities so as to have a robust integrated reporting that could influence good practices. The coming years will prove critical in the race towards achieving integrated reporting assurance in developing countries. The results from this study provides important implications, contributions and future direction for further studies.

Most corporate organizations provide voluntary disclosure on integrated reporting matters which has implication for entities’ stakeholders. Voluntary disclosure studies (Maroun, 2018; Hassan et al., 2020; Erin and Bamigboye, 2022) have contested that stakeholders most times may not understand the content of the integrated reports prepared by these corporate entities. It is important for firms to consider and value the interest of both the internal and external stakeholders in their corporate agendas especially as it relates to disclosure of material issues. It is becoming necessary for those charged with governance in corporate institutions to consider making disclosure of integrated reports mandatory. Since corporate entities are the key drivers in advancing ESG and integrated reporting strategy; it pertinent that their stakeholders are well informed in this process. Policymakers in charge of corporate entities need to respond to the issues of nonfinancial reporting and take an active role in promoting the agenda. Erin and Adegboye (2021) believed that stakeholder representatives should be engaged in the IRPs so as to cater for the general interest of the stakeholders.

Another implication is the credibility of those information disclosed. Since most organizations are yet to provide assurance, the reliability and credibility of these disclosures become doubtful. In this regard, literature has emphasized the need for assurance by external parties like consultant or auditors to verify the authenticity and reliability of those reports (Maroun, 2019; Rinaldi et al., 2018). In 2016, International Federation of Accountants (IFAC) supported the need for external assurance on IRPs. IFAC emphasized that to ensure accountability, transparency and probity by corporate entities, the need for external assurance becomes critical. To support the IFAC assertion, Vitolla et al. (2020) suggested that countries where the institutional framework is weak, there is need to have their integrated reports assured by external consultant. What this implies is that where disclosure is voluntary and not assured by independent party, the content of those disclosure may not be relied upon. This paper is useful for policymakers and international standard-setting institutions to have a rethink on the need to canvass for external assurance of IRPs especially in developing countries.

This study provides insight into the role of corporate governance and assurance in IRPs of sampled entities in South Africa. It offers an original insight in the field of nonfinancial reporting practices for corporate entities and contributes to accounting research as an emerging field. This study provides important contribution to those charged with governance and policymakers to have a rethink on how they could be bridge the gap between integrated thinking initiatives and increased dialogue with the public. We advise International standard-setters in the field of accounting and nonfinancial reporting on the need to have a robust and effective integrated reporting framework that will serve as a guide to all categories of practitioners.

This study provides a new and interesting direction for future research on the subject of corporate governance, assurance and IRPs in corporate settings especially in developing countries. Future research could explore the role of stakeholders in advancing nonfinancial reporting practices of corporate entities, especially, how stakeholder representative could be engaged in IRPs. Also, future studies could examine the content and quality of IRPs of corporate entities in other countries in Africa. This would further enhance discourse on whether integrated reports are just mere impression management or value creation process for stakeholders. Finally, further studies could explore the use of qualitative research methods (survey approach) in addressing the issue integrated reporting.

Table A1 

Table A2 

Table A3