Abstract
Until recently, corporate South Africa was the only setting where Integrated Reporting was mandatory, with related practices guided by regulatory guidelines since 2010. However, regulators are increasingly intervening in practices related to Integrated Thinking and Reporting (ITR) across national, regional, and global contexts, either directly or by incorporating them into sustainability reporting standards. Despite this transition, the literature remains inconclusive regarding the advantages and drawbacks of shifting from voluntary to mandatory Integrated Reporting policies. Against this background, the current thesis explores how mandatory adoption of Integrated Reporting policies compares with voluntary adoption in terms of their long-term impact on firms’ engagement in ITR practices, as well as their environmental, social, and financial performances. To this end, two related institutional contexts are examined: corporate South Africa, which remains the world’s most prominent setting of mandatory Integrated Reporting, and the voluntary adoption of the International Integrated Reporting Council’s approach, the principal guiding resource for Integrated Reporting under the IFRS Foundation.Theoretically, this thesis is founded on Social Systems Theory as the primary theoretical reference, while incorporating an institutional perspective from legitimacy theory, both of which allow for the inclusion of wider societal phenomena in explaining the efficacy of Integrated Reporting policy. A causal framework for policy evaluation is employed to carry out the main analysis, utilising both staggered and simple Difference-in-Differences methods, while accounting for firm- and country-specific variations, as well as time-specific shocks. Two samples of Integrated Reporting policy adopters are used: the first consists of 174 voluntary adopters from 34 countries, while the second consists of 166 mandatory adopters listed on the Johannesburg Stock Exchange. The analysis time frame spans the period 2010-2023.
The findings reveal that voluntary adoption of Integrated Reporting policy may lead to negative consequences on firms’ ITR, environmental, and social performances in the long run, suggesting that the adoption in this context may serve as a greenwashing act. In contrast, mandatory adoption can lead to a transitory improvement in this context. The evidence further suggests that the observed impact in the mandatory context depends on the quality of the regulatory system, as measured by the transparency of the national-level corporate governance setting. Finally, no statistically significant impact of adopting Integrated Reporting policy on financial performance was found in either the mandatory or voluntary adoption contexts.
Taken together, the results imply that neither voluntary adoption of Integrated Reporting policy nor mandatory adoption led to a sustainable improvement in firms’ performances within the research setting of this thesis. Theory suggests that while regulatory-backed Integrated Reporting policy may prompt a significant positive response among firms, long-term improvements in this regard may require concurrent market and governance transformations. Another implication of these findings is that the mandatory adoption of similar global or regional initiatives involving ITR practices, such as those endorsed by the IFRS Foundation and EFRAG, does not necessarily result in similar outcomes for firms’ practices across different countries. This phenomenon suggests a new research avenue, where variations in the quality of ITR practices among adopters of similar initiatives are examined, akin to the approach taken in the field of international financial accounting.
Among other things, the originality of the current thesis stems from demonstrating how the impact of Integrated Reporting policy evolved over time within both mandatory and voluntary contexts. This was accomplished by revealing the dynamic nature of the examined impact, a phenomenon that was not noted in prior literature and made possible by employing a staggered event-study Difference-in-Differences approach. Furthermore, this thesis contributes to the extant literature by exploring how the efficacy of mandatory Integrated Reporting in shaping firms’ practices can be largely explained by the quality of the regulatory system.
Date of Award | 2025 |
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Original language | English |
Awarding Institution |
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Supervisor | Gizella Marton (Supervisor) & Stavros Kourtzidis (Supervisor) |