Article Type : Research Article
Authors : Adel N
Keywords : Integrated reporting; Quality; Impact; Governance mechanisms; Listed companies
The
study assessed board size, gender diversity, board independence, board role,
duality, environmental, social and governance (ESG) performance and CSR
strategy listed on the London FTSE100. We analyse the impact on the quality of
companies' integrated reporting. Hypotheses were tested using regression models
on a sample of 97 publicly traded companies over nine years (2012- 2020). An
integrated report quality dashboard (IR) was used to measure report quality.
The results show that the quality of integrated reporting is significantly and
positively impacted by board independence, board activity, duality,
environmental, social and governance (ESG) performance, and CSR strategy.
Increase. This study contributes to the literature by revealing several non-economic
factors that influence IR quality. To the authors' knowledge, this is the first
study to focus on IR quality in the context of public companies.
Increasing demands from various company stakeholders
are forcing companies to change their reporting strategies. Financial data
(financial reports) are essential for evaluating company activities, but the
lack of information on strategies and results related to company policy leaves
company stakeholders with important information for decision-making.
Information is not provided [1]. Additionally, the global financial crisis and
heightened stakeholder concerns have led analysts and the public to consider the
need to overhaul the current model of corporate reporting [2,3]. It is clear
that the amount does not reflect the company's activities or its impact on the
community. Therefore, it needs to provide comprehensive data that enable
various stakeholders to better analyse the overall situation of the company.
These circumstances have led to the preparation of integrated reports that aim
to reconcile financial and non-financial information [4]. An integrated report
is not simply a combination of a financial report and a social or
sustainability report, but integrates innovative communication methods that
integrate different types of information [5]. This is what I did. Integrated
reports aim to enable stakeholders to more accurately assess a company's
current and future value-creating capabilities [6]. It's a way to improve your
company's image. Synthesis reports have attracted the attention of both
academics and practitioners [7]. A KPMG study (2017) shows how integrated
reporting has evolved since the early days of the integrated reporting
framework. However, reporting quality is an important aspect of an integrated
report [8]. Of the many studies on integrated reporting, very few address
quality issues. Therefore, further empirical research is needed on the quality
of integrated reporting, especially on determinants that are poorly studied.
These studies focus on determinants of integrated reporting quality at the
organizational level [9]. Any industry, any company. More profitable companies
have more resources to devote to using non-financial disclosure tools [10]. At
the same time, information quality impacts financial performance. One of the
main goals of corporate disclosure is to reduce information asymmetries between
stakeholders and managers, thereby reducing perceived uncertainty [11]. The
lower the level of uncertainty observed by lenders, the higher the required
rate of return and the higher the firm's value [12,13]. The impact of
disclosure on funding costs and goodwill does not come solely from disclosure
of financial performance [14]. Disclosure of non-financial information also
affects cost of capital and corporate value. In particular, the scope and
quality of nonfinancial disclosures are negatively related to the cost of
capital. Potentially lower capital costs may therefore act as an incentive for
firms to provide higher quality information [15,16]. The purpose of this study
is to examine the impact of governance mechanisms on the quality of integrated
reporting. More specifically, the study analyses (board size, gender diversity
on the board, board independence, and duality, number of board meetings, and
ESG impact. performance, CSR strategies) on the quality of the Integrated
Report (Tables 1-5).
Impact of governance
mechanisms on integrated report quality: research hypothesis Board size and
integrated reporting quality
The bankruptcies of several companies (Enron,
Worldcom, Xerox, Tyco, etc.) have brought attention to corporate governance
mechanisms [17]. Implementation of specific corporate governance mechanisms and
standards improves the quality of financial reporting, the transparency of
disclosures, and the extent of voluntary disclosures [18]. A board of directors
is a corporate governance mechanism that establishes policies and strategies to
be followed by management [19]. Because of the oversight role of boards,
companies with effective boards can influence management decisions to improve
disclosure. Therefore, the characteristics of a board of directors can have a
significant impact on corporate disclosure. Board size represents the total
number of executive and non-executive board members [20]. There is no clear
consensus in the previous literature regarding the association between board
size and corporate disclosure. A very large board is generally ineffective
compared to smaller boards due to problems related to communication and
coordination [21]. These problems can hinder management's ability to monitor
and control their process and decrease the quality of financial information. On
the other hand, argued that the size of the board is considered as one of the
main determinants of board effectiveness [22]. In this sense, an effective
board can mitigate managerial opportunism, which can result in better quality sustainability
reporting. Therefore, a large board should be an effective governance mechanism
enhancing corporate transparency and voluntary disclosure [23]. In particular,
large boards may have greater diversity that includes financial expertise and
experience that may impact managers' voluntary disclosure decisions and thus
expand forward-looking disclosures [24]. Empirical findings on the relationship
between board size and forward-looking information are also inconclusive. Found
an insignificant association between board size and corporate voluntary
disclosures [25]. Similarly, documented an insignificant association between
board size and forward-looking disclosures [26,27]. On the contrary, found that
board size improves corporate disclosures [28]. Furthermore, reported that
board size has a significant and positive influence on disclosure quality [29].
Found that board size has a positive association with voluntary forward-
looking statements [30]. According to, the board of directors mainly controls and
monitors the actions of managers [31]. Controlling and monitoring competences
are influenced by the size of the board; as has pointed out, a larger board
promotes the effectiveness and efficiency of these functions, increasing the
level of corporate transparency and disclosure [32]. Larger boards present a
greater diversity of experience, perspectives and opinions [33-35]. They also
maintain a larger pool of resources and skills [36]. These features increase
the board's control and oversight capacity and improve the disclosure of
information by senior management [37]. In light of this, we expect that the
greater control and oversight capacity of large boards of directors will
encourage the dissemination of higher quality information on intellectual capital
in integrated reports.
H1. There is a positive relationship between board
size and the quality of integrated reporting.
Gender diversity in the
board and the quality of integrated reporting
Board diversity refers to the variation among board
members with respect to their various characteristics, such as gender, age,
race, personalities, learning styles, education, expertise and skills. Board
members with different characteristics can bring a wide range of knowledge and
skills that promote different perspectives and ideas to boards. For example,
gender-diverse boards can bring more perspectives and opinions to board
discussions, leading the board to make better decisions [38]. According to, female
directors often stimulate more participatory communication among board members;
therefore, gender-diverse boards can better assess stakeholder needs [39]. In
this regard, the inclusion of different perspectives on boards could improve a
company's ability to manage the needs of different stakeholder groups,
including creditors, lenders, investors, analysts and auditors. In addition,
noted that gender diversity on boards has a positive impact on voluntary global
disclosure. Board diversity represents the differences between directors.
Diversity significantly increases the likelihood that different opinions and
perspectives are considered during the decision- making process [40]. It also
increases leadership effectiveness and promotes relationship building and
problem solving. Gender diversity is one of the most debated topics in the
literature [41]. Cultural and social differences between men and women make
this relevant. Previous studies have identified differences in personality,
work experience, skills, communication styles, training and values [42]. Some
studies have provided arguments that the presence of women on the board
improves its performance have shown that women are more likely to attend board
meetings than men, thus improving the board's monitoring and oversight
functions and consequently promoting the dissemination of more information
[43]. Furthermore, show how the presence of women on a board of directors
promotes a good working environment, as they are less focused on achieving
personal goals [44].
Furthermore, show how gender diversity can influence
corporate disclosure policies [45]. Women's behavioural patterns and values
are, in fact, closely related to greater corporate transparency [46]. The
presence of women on the board therefore guarantees greater attention to
disclosure and promotes the dissemination of more information. From this
perspective, we expect that the greater capacity for control and monitoring and
the greater attention to corporate transparency associated with the presence of
women on the board of directors will favour the dissemination of better quality
information on intellectual capital in integrated reports. Gender diversity
refers to the disparity in the characteristics presented by board members in
terms of the proportion of women on the board [47]. Gender diversity promotes
problem solving, increases leadership effectiveness and facilitates global
relationships more effectively. Due to certain inherent qualities of women,
such as sensitivity and transparency, their inclusion on the board can enable
the company to publish more voluntarily integrated information. This
sensitivity and transparency as noted by Bear in?uent on women's communication
style and also leads women to have a better relationship with all stakeholders
of the company [48]. As a result, they want to keep stakeholders informed and
give them information about what is happening in the company. In addition,
women think differently from men, and they have different work ethics and
perspectives due to their role as mothers and wives. Found a positive
relationship between the two variables [49,50].
H2. There is a positive relationship between gender
diversity on boards and the quality of integrated reporting.
Board independence and
integrated reporting quality
The effectiveness of corporate governance mechanisms
in reducing agency problems depends on the composition of boards [51]. Boards
are usually composed of executive and non-executive (independent) members.
Board composition is defined as the percentage of independent directors out of
the total number of directors [52]. From an agency perspective, boards with a
higher proportion of independent directors are more effective in monitoring and
controlling management and are more successful in steering management towards
long-term value. The compensation of independent directors is not linked to the
short-term financial performance of a company, unlike the compensation of other
board members [53]. As independent directors are less aligned with company
management, they may have a greater tendency to encourage companies to disclose
higher levels of voluntary information [54]. Therefore, if independent
directors dominate a board, they may have the power to force management to
disclose more forward-looking information. Previous literature on the
effectiveness of independent directors presents inconclusive results. For
example, and found that the percentage of independent directors has an
insignificant impact on forward-looking information [55]. On the other hand,
detected that firms with a high number of independent directors published
accurate sales forecasts [56]. In addition, Wang and reported that board
independence is strongly associated with earnings forecast disclosures.
Similarly, determined that the proportion of independent directors is
positively related to forward-looking disclosures. The actual functioning of
the board is related to its structure and composition [57]. According to, the
board's ability to reduce agency costs is enhanced by the presence of non-executive
members. A board with a higher percentage of non- executive directors is able
to control and monitor more effectively because non-executive members do not
have a position in the firm and are not directly involved in corporate
management [58,59]. Furthermore, non-executive directors are not linked to CEOs
because their careers do not depend on them and they have no interest in
collaborating with executive members. According to, the presence of non-
executive directors also ensures greater prestige and expertise available to
the board, contributing to the board's proper functioning [60]. The presence of
non-executive directors ensures that the board has a greater capacity for
control and monitoring and, consequently, promotes the dissemination of more information
[61]. Moreover, non-executive directors are more likely to respond to requests
for information than executive directors because they do not feel the pressure
of competitors as strongly. From this perspective, non-executive directors have
a greater stakeholder orientation due to their nature and the absence of
financial stakes in the company. The stakeholder orientation of non-executive
directors allows them to go beyond the interests of shareholders and to balance
the expectations of stakeholders with those of the firm [62]. The presence of
non-executive directors thus ensures greater attention to stakeholders and
promotes the dissemination of more information. From this perspective, we
expect that the greater monitoring and oversight capacity and stakeholder
orientation provided by non- executive directors will foster better quality in
integrated reporting.
H3. There is a positive relationship between board
independence and the quality of IR
Board activity and the
quality of integrated reporting
Previous accounting literature in the area of earnings
management suggests that more independent boards should significantly reduce
earnings management and thus improve disclosure quality [63]. In the context of
IIRC companies, we can hypothesise that more independent boards will positively
influence the quality of corporate disclosure (and thus Integrated Reports) by
promoting materiality disclosure. We argue that independent directors often
have a greater interest in ensuring the good behaviour of the company and the
achievement of its objectives [64]. Thus, they should show greater objectivity
and independence in their activity. This increased focus on monitoring
corporate conduct, together with the desire to improve their reputation, will
increase the quality of corporate disclosure. Moreover, as their actions are
less affected by the actions of competition a board's ability to monitor and
control is closely related to its level of activity have shown how more
meetings make boards more diligent and encourage them to meet the needs of
stakeholders [65]. Specifically, with regard to disclosure, the authors showed
how more active boards promote higher levels of information dissemination.
According to, greater board activity improves supervision and control and decreases
the likelihood of revenue manipulation [66]. Pointed out that the frequency of
board meetings is positively associated with better disclosure of executive
compensation practices. Demonstrated how board activity reduces information
asymmetry in quarterly earnings announcements [67]. Furthermore, found that the
board's activity mandate is positively related to the amount of voluntary
information disclosed. From this perspective, we expect that the increased
monitoring and oversight capacity of the most active boards will promote higher
quality intellectual capital disclosures in integrated
H4. There is a positive relationship between the
number of board meetings and the quality of integrated reports.
Duality and integrated
reporting quality
In its concept, the quality of integrated reports
refers to the degree of compliance of integrated reports with the provision of
a relevant framework. Therefore, a high degree of compliance can be translated
into high quality integrated reports and a low degree of compliance can be
translated into low quality integrated reports. Noted that the structure of the
integrated report is not important, but the crucial aspect is the content and
quality of information provided [68]. Materiality and conciseness are among the
6 guiding principles that inform the content and presentation of a report, as
well as the process by which it is developed. Materiality plays a crucial role
in determining the elements to be included in an integrated report and the
conciseness of the report. According to the Framework: An integrated report
should disclose information on matters that materially affect the
organisation's ability to create value in the short, medium and long term. CEO
duality, according to, identifies the lack of separation between the management
of decisions and the control of decisions. CEO duality implies a concentration
of decision-making power, which reduces the independence of the board and its
ability to control and monitor. CEO duality reduces the objectivity of the board
due to the power of the chairman to set the agenda and select members and to
hide critical information from other board members [69]. In addition, CEO
duality creates a strong individual power base that could reduce the
independence of the board. Therefore, CEO duality creates a circumstance that
could hinder disclosure. Empirical evidence shows that CEO duality has a
negative impact on monitoring and on the level of information disclosed by
companies [70]. The level of alignment of the integrated report with the IIRC
framework requires a high level of monitoring and follow-up. This is likely to
be more common in the absence of CEO duality.
H5. There is a negative relationship between the
duality of functions and the quality of integrated reports
Many articles contribute to this view, i.e. combining
financial and non-financial information in one report will lead to higher
quality reporting and provide recipients with more differentiated information
about the company. An IR should provide investors not only with information
about the value added, but also about how the value was generated. We follow,
who apply a cognitive-psychological approach based on the model of Maines and
to assess investors' information processing [71,72]. The model includes the
concept of cognitive costs that arise during information processing. Follow who
propose a link between cognitive cost theory and the proximity compatibility
principle. This principle states that information relevant to a certain task
should be presented in an appropriate display proximity. The more information
is needed to solve a task, the greater the need for a high display proximity to
solve a task. Thus, high display proximity is considered with low cognitive
cost. In this context, investors should generally perceive IR as positive, as
their acquisition costs to receive the required information are lower, as more
information about the respective company is reported in one report. As a
result, investors can obtain a more distinct picture of the company and
generally value the ESG report higher if financial and ESG information is
reported simultaneously. Although some studies examine an influence of
assurance on the value relevance of ESG indicators, the impact is context
specific [73]. The requirements of the audit profession as defined by the
International Federation of Accountants in their International Accounting
Standard 200 include, among others, professional judgement, professional
scepticism and ethical requirements and therefore aim at providing an adequate
degree of credibility. Therefore, we expect that an ESG report by a Big 4 audit
firm will create more relevant value from a company's ESG report. This study builds
on and uses signalling theory to discuss a possible market value enhancing
effect of assurance. Thus, the following hypothesis could be explained using
signalling theory as defined by: an information asymmetry exists between the
sender (company) and the receiver (stakeholders, e.g. investors) regarding ESG
performance and impact. Due to the additional information about the credibility
of ESG topics disseminated through the assured RI, the company concerned
signals a stronger commitment to sustainability. Consequently, stakeholders
perceive an RI assured by a professional audit firm as more reliable. This is
in line with, who examined voluntary online disclosure on ESG topics as a
reduction of information asymmetry [74]. Although the IR concept is gaining
remarkable attention, empirical research on this concept is scarce [75].
Stakeholders, mainly investors, have demanded detailed information on
ESG-related issues; thus, UK companies have sufficient incentives to engage in
ESG and IR to voluntarily respond to stakeholder demands. Companies are likely
to benefit from 'integrated thinking' as a possible outcome of IR; as a result,
companies can better understand the link between their value drivers and their
strategic objectives [76]. Therefore, linking ESG to financial information via
integrated reporting allows stakeholders to better understand the company and
its future. Integrated reports from companies that do not disclose much about
ESG are unlikely to improve understanding of the links between ESG and financial
performance. Moreover, there is a potential link between ESG and the quality of
integrated reporting, and RI could help make it more visible [77].
H6. There is a positive relationship between the level
of ESG performance and the quality of integrated reporting
CSR strategies and
integrated reporting quality
IIRC states that RI "brings together important
information about an organisation's strategy, governance, performance and
prospects in a way that reflects the business, social and environmental context
in which it operates." IR highlights the links between financial/non-
financial value drivers and organisational objectives and addresses potential
dilemmas. If IR is to become the "primary reporting vehicle",
companies need to include only the "most important information", and
they can then address detailed stakeholder needs in additional reports. IIRC
recognises the contextual differences and outlines four equally valid routes to
the adoption of RI: first, combining the CSR report with the annual report -
which is not necessarily RI per se; second, publishing a stand-alone RI report
for companies without CSR experience; third, modifying the CSR report and
referring to it in the annual report (for companies with CSR experience); or
fourth, adopting RI only in the internal management control system [78,79].
Several authors argue that CSR standards and guidelines help a company to
become familiar with the dimensions of the rating and their fit with their CSR
peer group. To date, no single CSR practice has been established [80]. The CSR
practices relevant to our case study are the widely accepted GRI guidelines and
ISO certification. The GRI "G4" Sustainability Reporting Guidelines
help companies report on the impacts of their day-to-day operations in the four
categories: labour practices and decent work, human rights, society and product
responsibility [81]. Although several variables of company characteristics
influenced voluntary reporting, no relationship between company size, industry
type, profitability, leverage and the level of voluntary reporting in the Thai
context as that of social responsibility reporting companies found that there
was a positive relationship between CSR attribution and voluntary reporting
[82,83]. The objective of the CSR award is to encourage companies to balance
their economic, societal and environmental responsibility and develop corporate
sustainability. Found a positive relationship between CSR awards and financial
and non-financial reporting, as the CSR award is an indicator of how well
companies are meeting societal expectations through social and environmental
responsibility as well as corporate responsibility [84].
H7: There is a positive relationship between CSR
strategies and the quality of integrated reporting
The study sample
Our initial sample was based on the availability of
integrated reporting and governance data in the Thomson Reuters Asset4 and
Thomson Reuters Eikon database over the period (2012- 2020). We started with
the full available sample of 873 observations (97 companies per year) of
companies listed on FTSE100
Data source
We used the ASSET4 dataset and Thomson Reuters Eikon
to collect data on corporate governance indicators. The final sample of our
study consists of 873 observations from eight sectors. The distribution of the
sample according to sectors of activity is composed of 26.8% and 21.65%
successively of companies from the financial and basic materials sectors, and
16.49% from the services and industry sectors, while the rest of the
observations are related to the technology, consumer goods, telecommunication
and health sectors. The quality of the Integrated Report was determined
according to the EY (Ernst & Young) survey.
Definition and
measurement of the dependent variable: The quality of the integrated report
The development of integrated reporting in Brittany
should be discussed in the context of its background and the regulation of
corporate sustainability and sustainability reporting. Audit quality remains a
priority and is at the heart of our commitment to serving the public interest.
It underpins EY Global's sustainability and serves our common goal of Building
a Better Working World. Auditors play a crucial role in the functioning of
financial markets, promoting transparency and investor confidence. Companies,
regulators and other stakeholders rely on them to live up to this requirement
in all engagements. The positive impact of this regulation becomes evident with
the evidence that over 88% of the top 100 companies listed in Britain in 2020
reported on aspects such as the environment, community, diversity and employee
relations. The positive impact of this regulation becomes evident with evidence
that over 88% of the top 100 UK listed companies in 2020 reported on aspects
such as the environment, community, diversity and employee relations, whereas a
comparative group of Fortune Global 100 companies were significantly behind.
This increase in sustainability reporting has also been fuelled by the
introduction of the London FTSE100 Socially Responsible Investment Index in
2019. FTSE100 uses the Global Reporting Initiative (GRI) guidelines as a
benchmark and therefore provides a guide for companies to report on corporate
sustainability. In another world first, the King III Code, published in 2009,
introduced the requirement to prepare an integrated report. This code has been
incorporated into the FTSE100 listing rules, and as a result all FTSE100 listed
companies are required to prepare an integrated report or explain the reasons
for non-compliance. The King III Code describes that an integrated report
should put financial results into perspective by also reporting on the
company's "positive and negative impact on the economic life of the
community in which it operated during the year under review", often
classified as ESG issues. In addition, it should indicate "how the company
intends to strengthen these positive aspects and eradicate or improve the
negative aspects in the coming year" (IoDSA, 2009, p. 4) The emphasis on
reporting on the company's impact on the community in this code is interesting,
as it implies that the readership of an integrated report is much broader than
that of providers of financial capital. This highlights an embodiment of a
'value to society' perspective, in line with the sustainability reporting
tradition, rather than an 'investor value' perspective underlying integrated
reporting as explained by the IIRC. Thus, there is an influence of the
historical importance of social issues and a long tradition of robust
sustainability reporting in the conceptualisation of integrated reporting in
Britain. The dependent variable is the quality of integrated reporting assigned
in the E&Y surveys. A final ranking was given to the entities based on the
average of the referees' scores. Large variations in the marks were examined to
ensure that nothing had been missed. The adjudication process resulted in the
classification of each entity's integrated report into one of two groups:
"Excellent (1)" and "Progress to be made (0)".
Definitions and measures
of independent variables
In our study we restrict ourselves to board
characteristics that can be summarised as board size, board independence,
duality of functions, gender diversity, number of board meetings, board
nomination committee, creation of a remuneration committee and a variable
related to corporate social responsibility strategy. In the subsections below,
we have developed the assumptions for each of these corporate governance
characteristics.
The objective of this chapter is to examine the impact
of board size, board independence, dual roles, gender diversity, and number of
board meetings, ESG performance and a corporate responsibility strategy
variable on the quality of integrated reporting by London Stock Exchange listed
firms. Our model aims to explain the variation of the dependent variable, which
is the quality of the integrated report in this model, as a function of board
size, board independence, dual functions, gender diversity, and number of board
meetings, ESG performance and a variable related to the corporate
responsibility strategy of the firms listed on the London Stock Exchange
FTSE100.
Evaluation model
IR it = ?0 + ?1Boardsize it + ?2Gender it + ?3BIndep it + ?4BTenure it + ?5Duality it + ?6ESGPerf it + ?7CSR it + ?it
With:
Error term.
Descriptive statistics
Descriptive statistics consist of an exploratory
analysis of the sample and the research variables. Through this analysis, we
will first determine the trend of each variable. The descriptive statistics of
the study model are summarised in Table 3.
Description of the
variables
Table 3 summarises the trend of each variable in the
models. The mean and min and max values of the IR variable are 0 and 1
respectively. 0.595 means that 59.5% of the integrated reports in our study
sample are of good quality. Such a value reflects the importance attached by
the firms in our sample to publishing quality integrated reports.
A mean of the Board size variable of 11.49227 means
that the boards of the firms in our study sample have an average of 11 members.
A mean of the Gender Diversity variable of 19.09709
means that 19% of the board members of the firms in our study sample are
female.
A mean of the Bindep variable of 55.55183 means that
55.5% of the board of directors are represented by independent members.
A mean of the BTenure variable of 7.48 means that the
boards of the firms in our study sample meet 7 times a year.
A mean of the Duality variable of 47.5 means that
47.5% of the firms in our study sample have a duality of functions
A mean of the ESG Perf variable of 55.24, this mean
indicates that the companies in our study sample verify the existence of about
55% of the ESG performance criteria with a maximum of 87.24%.
For the CSR Strategy variable, the average is
49.87285; this average indicates that the companies in our study sample meet
approximately 50% of the social responsibility criteria with a maximum of
98.5%.
In the rest of the analysis of the results we will
interpret the participation of each explanatory variable in the evolution of
the quality of IR.
Correlation analysis:
Bivariate analysis
The correlation analysis aims to identify the
relationships between the variables. Table 4 summarises the correlation
coefficients between the variables in the model for evaluating the quality of
the integrated report discussed in this chapter, using the Pearson test. For
the model used, only the correlation coefficients for the variables Board size
and duality have negative signs, which implies that companies with large boards
of directors and which verify the combination of the functions of the chairman
of the board of directors and the chief executive officer may suffer from an
opaque or mediocre quality of the integrated report distributed. For all other
variables, the positive signs of the correlation coefficients between these
variables and the quality of the integrated report explain that these variables
improve the quality of the integrated reports disseminated by the firms in our
study sample. This reflects the fact that good corporate governance in general,
and board characteristics in particular, provide firms with a better
opportunity to improve the quality of integrated reporting. It is more likely
that a higher proportion of gender diversity is served by women with different
skills and attitudes, including characterised directors, and positively affects
the functioning of other governance mechanisms vis-à-vis the quality of the
integrated report of the firms in our study sample.
Multivariate Analysis:
Results and Interpretations
This part is a possible empirical validation of the
research hypotheses. After an exploratory study that dealt with the
specificities of the sample and the functional relationships between the
variables, we will perform a multivariate analysis.
Econometric tests applied to the empirical model
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?????Duality???????? + ?????ESGPerf???????? + ?????CSRstrategy ???????? + ????????????
Analysis of the results
of the empirical estimates
It should be recalled that the purpose of estimating
the empirical model is to verify and validate the research hypotheses presented
related to the effects of governance mechanisms on the quality of the
integrated report. The interpretation of the results presented in the table
below allows us to advance some analyses concerning the general characteristics
of the empirical models as well as the validation of the research hypotheses
conducted by the multivariate analysis. Indeed, the value taken by the explanatory
power of the first model R2adjusted= 0.8553 translates a good quality of the
model. This postulate implies that the integration of the different explanatory
variables makes it possible to explain 85.53% of the variation in the quality
of the integrated ratio of the observations in our study sample. Following the
confirmation of the quality of the evaluation model, we will mobilise the
theoretical framework of the argumentation of the results of the multivariate
analysis that justifies the relationship between the quality of the integrated
report and the mechanisms of corporate governance. This postulate is also
confirmed by the result of Fisher's statistics which confirms the capacity of
the independent variables of our econometric model to explain the variation of
the quality of the integrated report which takes a value (F= 327.75) for a
significance level P-value=0.0000. The econometric tests applied to the
explanatory models showed the absence of a heteroscedasticity problem.
According to, such a problem implies that the hazards do not have the same
variance, the variance-covariance matrix cannot be estimated systematically and
the generalized least squares estimator, which is an efficient estimator,
cannot be calculated [85].
The board size variable
The regression coefficients of the variable board
size, denoting the variable board size, is positive for the evaluation model by
a value of (t-student= 0.44; P = 0.657) not significant. This indicates that
the size of the board of directors is not significant in determining the
quality of the integrated report issued by the company.
Hypothesis (H1) not confirmed, this means that a very
large board is generally ineffective compared to smaller boards due to
communication and coordination issues [86].
The gender diversity
variable
The regression coefficients of the variable gender
diversity, designating the gender diversity within the board of directors, are
negative and significant at the 1% level (t-student= -5.39; P = 0.000). An
inverse sign to the expected one implies that the existence of a significant
proportion of women on the board deteriorates the quality of the integrated
report, such a value is justified by the low representation of women on the
board of the companies studied.
The unconfirmed hypothesis (H2), the greater
orientation towards actors who distinguish that there is no positive
relationship between the presence of women in the board and reporting quality
[87].
The B Indep variable
The results provide evidence for the acceptance of the
hypothesis of board member independence. Indeed, an expected and significant
coefficient sign of this variable leads to the conclusion that the percentage
of independent directors significantly reduces the quality of the reports
integrated by the companies in our sample (t-student= 13.93; P = 0.000). The
results found highlight the significance of the effect of the Bindep variable
on the quality of integrated reports.
Hypothesis (H3) is confirmed at the 1% significance
level, most of the actors distinguish that boards with a higher proportion of
independent directors are more effective in monitoring and controlling
management and are more successful in steering management towards long-term
value [88].
BTenure variable
The interpretation of the results presented in the
table below concerning the variable Btenure allows us to state that the
hypothesis related to this variable is confirmed at a significance level of 1%
for the model of evaluation of the quality of the integrated report. Indeed,
the fact of having values of (t-student= 4.99; P = 0.000), allows us to detect
the implication of this postulate in the improvement of the quality of the
integrated reports disseminated by the companies.
Hypothesis (H4) is confirmed at the 1% significance
level, this shows that we have obtained the same results from the research on
which we relied.
The Duality variable
With regard to the result of the estimation of the
evaluation models, the results provide elements of acceptance of the hypothesis
of the duality of the functions. Indeed, an expected sign of the coefficient of
this variable leads to the conclusion that the duality of the functions of
chairman and chief executive officer affects negatively and significantly at
the 1% threshold and reduces the quality of the integrated report of the
population of our study (t-student= -6.74; P = 0.000). Indeed, several studies
show a significant effect that the separation of the functions of chairman and
chief executive officer can exert.
Hypothesis (H5) is confirmed at the 1% significance
level, this result being consistent with research by [89].
The ESG Perf variable
The regression coefficient of the ESG Perf variable,
which refers to the percentile score ranking that takes into account a
company's ESG performance indicators, is positive but not significant for all
three models (t-student= 8.25; P = 0.000). This postulate implies that a high
level of performance contributes to the improvement of the quality of the
integrated reports processed in our study.
Hypothesis (H6) is confirmed at the 1%, % significance
level, this shows that we obtained the same results from the research we relied
on.
The SR strategy variable
With regard to the result of our estimation, we can
point out that the regression coefficient for the variable strategy, denoting
the CSR index, is positive and significant at the 1% level (t- student= 7.22; P
= 0.000). This hypothesis implies that an increase in the CSR index is worth
the improvement in the quality of integrated reports disseminated by companies listed
on the London Stock Exchange FTSE100.
Hypothesis (H7) is confirmed at the 1% significance
level, this shows that we obtained the same results from the research we relied
on.
Traditional reporting models focus on a relatively
narrow representation of the historical financial performance of the value
creation process. With this in mind, the International Integrated Reporting
Council (IIRC) has developed the International Integrated Reporting Framework.
Its primary purpose is to help organizations communicate the broad range of
information necessary for investors and other stakeholders to assess their
long-term performance. A clear, concise, coherent and comparable form of
perspective. Companies that have focused solely on financial performance at the
expense of social outcomes have failed in recent years [90]. As a result, there
has been a significant increase in the focus on ESG and good governance issues.
RI is an innovative tool that allows her to combine financial and non-financial
information in one report. The purpose of this study was to examine the impact
of governance mechanisms on the quality of integrated reports. The results show
that the quality of IR depends on two variables (board size and board size and
gender diversity). Management should increase transparency by expanding the
content and information quality of reports to avoid conflicts with
stakeholders. Managers therefore need to improve the quality of their reports
to increase stakeholder engagement and show interest to non-shareholder
stakeholders. In other words, the quality of disclosure should aim to show that
high profitability does not come at the expense of non-financial goals.
Therefore, management should consider IR quality as a means of improving
corporate image and reputation in the eyes of stakeholders. Furthermore, from
the perspective of agency theory, disclosure is an effective means of reducing
information asymmetry and aligning the interests of management and
shareholders, thereby reducing agency costs. In this regard, listed companies
need to improve the quality of their integrated reporting, provide a complete
picture of their ability to create value over time, reduce information
asymmetry issues and reduce agency costs. I have. As with other studies, this has
some limitations. While empirical methods can analyse large amounts of data and
compare results, sampling methods do not allow comparisons between countries or
groups of countries. Furthermore, this study focuses only on listed firms and
ignores the behaviour of non-listed firms [91-96].