Firm-specific Information and Proprietary Costs: Evidence from Mandated Integrated Reports

54 Pages Posted: 11 Jun 2021 Last revised: 19 Apr 2022

See all articles by Mary E. Barth

Mary E. Barth

Stanford University - Graduate School of Business

Steven F. Cahan

University of Auckland Business School

Lily Chen

University of Auckland Business School

Elmar R. Venter

University of Pretoria

Date Written: April 19, 2022

Abstract

Our study addresses whether integrated report quality, IRQ, is negatively associated with stock price synchronicity, an inverse measure of firm-specific information, and the extent to which the relation between IRQ and synchronicity is attenuated by proprietary costs. In integrated reports, a firm integrates financial and non-financial information to explain how it uses financial, manufactured, intellectual, human, social and relationship, and natural capitals to create value. Financial statements and sustainability information are key to integrated reports. Using a sample of firms from South Africa, which mandates integrated reporting, we find IRQ is significantly negatively related to synchronicity. Examination of 12 subcomponents of IRQ based on the Integrated Reporting Framework, reveals that 11 are significantly negatively associated with synchronicity. Further, the negative relation between synchronicity and IRQ is significantly less negative for firms with higher proprietary costs, particularly costs associated with growth opportunities and intangible assets. Our study may be informative to the International Sustainability Standards Board as it considers the role of the Integrated Reporting Framework in developing sustainability standards. Our evidence suggests that disclosures in higher quality integrated reports reveal more firm-specific information that investors incorporate into stock prices, but such disclosures are constrained by concerns about revealing proprietary information.

Keywords: integrated reporting, share price informativeness, proprietary costs, sustainability

JEL Classification: G12, G14, G2, M1, M2, M4, M41

Suggested Citation

Barth, Mary E. and Cahan, Steven F. and Chen, Lily and Venter, Elmar R., Firm-specific Information and Proprietary Costs: Evidence from Mandated Integrated Reports (April 19, 2022). Available at SSRN: https://ssrn.com/abstract=3857927 or http://dx.doi.org/10.2139/ssrn.3857927

Mary E. Barth

Stanford University - Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States
650-723-9040 (Phone)
650-725-0468 (Fax)

Steven F. Cahan

University of Auckland Business School ( email )

12 Grafton Rd
Private Bag 92019
Auckland, 1010
New Zealand

Lily Chen

University of Auckland Business School ( email )

12 Grafton Rd
Private Bag 92019
Auckland, 1010
New Zealand

Elmar R. Venter (Contact Author)

University of Pretoria ( email )

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
213
Abstract Views
722
rank
194,876
PlumX Metrics