Effect of Integrated Reporting on Firm’s Value: The Nigeria Manufacturing Sector Experience. (Published)
The main objective of this study was to investigate the effect of integrated reporting on firms’ value drawing samples from listed manufacturing firms in Nigeria between the periods of 2011-2020. In this study, human capital disclosure index, manufacturing capital disclosure index, and social and relationship capital disclosure index were the integrated reporting proxies adopted to evaluate the effect on value of Nigeria manufacturing firms. Firms’ value was measured in terms of Tobin Q, and year price index was adopted as the control variable. Ex post factor research design was used and the study made use of secondary data sourced from the sampled companies’ annual reports and Nigeria Exchange Group Fact book. Data for integrated reporting variables were derived using disclosure checklist developed in accordance with the integrated reporting framework disclosure guidelines. Purposive sampling technique was used to select 51 out of the 59 manufacturing companies listed on the Nigeria Exchange Group. In order to examine the cause-effect relationship between the dependent variable and independent variables as well as to test the formulated hypotheses, the researcher used a robust regression analysis. The results of the analysis showed that the disclosure of human capital information in the annual report of listed manufacturing firms in Nigeria significantly improves the firm’s value. Based on this findings, it was concluded that only the variable of human capital disclosure has significant effect on firms’ value. Finally, the study recommended that the management of manufacturing firms in Nigeria should capture all disclosure items concerning human capital in their financial statements as this tends to improve the value of the firm and increase shareholders’ wealth. It was also recommended that management should develop an inclusive organizational culture for disclosing non-financial information with long term value creating capacity as they can maximise the market value of the firm over the short, medium and long term horizon.
Keywords: Human capital disclosure, firm’s value, integrated reporting, manufactured capital disclosure, social and relationship capital disclosure
Effect of Integrated Reporting on Firm Value of Listed Companies in Kenya (Published)
The aim of this paper was to evaluate potential benefits of the Integrated Reporting <IR> on listed firms at NSE. The study draws on stakeholders, legitimacy and agency theories to analyze the effects of <IR> on firm value. The study hypothesizes that there are positive associations between firm value and integrated reporting. The study used content analysis procedures to examine the extent of <IR> in annual reports (2015-2019) of 56 listed firms on NSE. The study developed proxies for Integrated Reporting index based on IIRC framework. The study used panel data regression to establish the association between the <IR> and firm value. The study found that <IR> affect firm value (using TQ measure) and had no significant effect on firm value (using ROA). It also showed that <IR> is positively related to ROA and negatively related to TQ among listed companies in Kenya. The findings also shows that firms that implement <IR> Framework have higher values with respect to ROA. This finding indicate that high value firms tend to embrace <IR> framework that is consistent with the prior studies unlike low value firms. However, the result shows that the most forthcoming companies in terms of <IR> have inferior firm value with respect to TQ compared to firms that had not embraced <IR>. Integrated reporting rate of adoption was low, but grew steadily from 9% (5 out of 56) in 2015 to 41% (23 out of 56) in 2019. This indicates that <IR> is gaining prominent and is the future of corporate disclosure. The study is limited to emerging countries like Kenya on the effect of <IR> on firm value. The finding is helpful to policy maker and prepares of corporate reports to establish the benefits of <IR> and embrace the integrated thinking of all aspect of business.
Citation: Robert O. Opanyi and Dominic A. Omare (2022) Effect of Integrated Reporting on Firm Value of Listed Companies in Kenya, European Journal of Accounting, Auditing and Finance Research, Vol.10, No. 7, pp.31-54
Keywords: Firm Value, integrated reporting, listed firms on NSE
Integrated Reporting and Implications for Accounting Curriculum in Nigeria (Published)
Integrated reporting (<IR>) has been promoted by influential international organisations as the communication vehicle that provides concise, future-oriented and strategically relevant information and integrates financial, social and environmental elements to providers of the capitals and other interested parties. Increasing adoption of <IR> globally envisages significant implications for accounting education and the accounting curriculum, for both professional and academic training necessary for the “new” corporate reporting protocol. This paper reviews integrated reporting literature to access the principles and frameworks and outputs articulated by these influential organisations. In view of the suggested reporting outcomes, fundamental guiding principles and the main components of an integrated report, it is envisaged that the “new” accounting curricula would focus more on the longer-term than the shorter-term, more on corporate strategic outlook than operational or transactional processes; more prospective rather than retrospective analysis and reporting on wider business performance metrics than on narrower external financial reporting data or audit compliance. While leading global professional accountancy bodies (e.g., ACCA & CIMA) have already fully incorporated integrated reporting principles within their curriculum at the professional level, only few universities outside Nigeria have incorporated integrated reporting principles or learning outcomes within their existing curriculum. The paper calls on Accounting Departments of universities to incorporate <IR> principles into their course offerings.
Keywords: Accounting Curriculum, Nigeria, Social Responsibility, Stakeholder Engagement, Sustainability, integrated reporting
Integrated Reporting: Advocacy for Nigerian Companies (Published)
In the 21st century, when integrated reporting is emerging as the new approach to corporate reporting, no Nigerian listed company is known to have prepared and published any variant of an integrated report. This is in sharp contrast to South Africa where integrated reporting is a mandated listing requirement. Perhaps Nigerian companies are insufficiently aware of the benefits of integrated reporting, hence the non-adoption of integrated reporting as the preferred corporate reporting model. In this paper, the concepts, scope and structure of integrated reports as well as benefits and scepticism of integrated reporting are accessed through a review of relevant literature. The paper recommends that the Financial Reporting Council of Nigeria (FRCN) “persuades” Nigeria listed companies to migrate to integrate reporting on a voluntary basis initially as soon as possible.
Keywords: corporate reporting model, financial and non-financial reporting Nigeria, integrated reporting
Evaluation of Integrated Reporting and the Value of Listed Manufacturing Firms in Nigeria (Published)
Integrated reporting is gaining attention of world-leading organizations and countries who are demonstrating global leadership in this emerging field of corporate reporting. However, the disclosure of non-financial information and its integration with financial information (integrated reports) and the benefits to the company and other stakeholders is not yet properly assessed in Nigeria. Prior studies in this area in different environments have produced mixed results and conclusions. This study examined the effect of integrated reporting on the value of listed manufacturing companies in Nigeria. The study adopted ex-post facto research design. The population of the study comprised 53 manufacturing companies quoted on the Nigerian Stock Exchange (NSE) as at 30th June 2017, from which 38 companies were purposively selected comprising companies from consumer goods and industrial goods during the study period (2012-2016). Data were sourced from the published audited financial statements validated by the external auditors’ report. Descriptive and inferential statistics using regression analyses were employed. The findings revealed that integrated reporting had significant effects on firm’s value measured by Tobin’s Q (TQ) (F(4, 131) = 22.75, Adj. R2 = .1470, p <0.05). Disclosure of Financial Capital (DFC) had a significant negative effect on TQ (β1 = -4.41; t(135)= -6.71, p <0.05); Disclosure of Manufactured Capital (DMC) had an insignificant positive effect on TQ (β2 = 0.051; t(135)= 0.14, p >0.05); Disclosure of Intellectual and Human Capital (DIHC) had an insignificant negative effect on TQ (β3 = -0.994; t(135)= -0.69, p >0.05); and Disclosure of Natural Capital (DNC) had an insignificant negative effect on TQ (β4 = -0.438; t(135)= -0.41, p >0.05). Firms’ size (SIZE) and leverage (FLEV) had significantly controlled the influence of integrated reporting on TQ (F(6,129) = 24.08, Adj. R2 = .1636, p <0.05). The study concluded that integrated reporting is still at its early stage of adoption in Nigeria and could be useful in determining the firm’s value of listed manufacturing companies in Nigeria. It was recommended that regulators should increase awareness, training and provide a framework for the mandatory adoption of integrated reporting in Nigeria.
Keywords: Disclosure, Leverage, Size, firm’s value, integrated reporting, integrated thinking, tobin’s q. transformation, value creation
Evaluation of Integrated Reporting and the Value of Listed Manufacturing Firms in Nigeria (Published)
Integrated reporting is gaining attention of world-leading organizations and countries who are demonstrating global leadership in this emerging field of corporate reporting. However, the disclosure of non-financial information and its integration with financial information (integrated reports) and the benefits to the company and other stakeholders is not yet properly assessed in Nigeria. Prior studies in this area in different environments have produced mixed results and conclusions. This study examined the effect of integrated reporting on the value of listed manufacturing companies in Nigeria. The study adopted ex-post facto research design. The population of the study comprised 53 manufacturing companies quoted on the Nigerian Stock Exchange (NSE) as at 30th June 2017, from which 38 companies were purposively selected comprising companies from consumer goods and industrial goods during the study period (2012-2016). Data were sourced from the published audited financial statements validated by the external auditors’ report. Descriptive and inferential statistics using regression analyses were employed. The findings revealed that integrated reporting had significant effects on firm’s value measured by Tobin’s Q (TQ) (F(4, 131) = 22.75, Adj. R2 = .1470, p <0.05). Disclosure of Financial Capital (DFC) had a significant negative effect on TQ (β1 = -4.41; t(135)= -6.71, p <0.05); Disclosure of Manufactured Capital (DMC) had an insignificant positive effect on TQ (β2 = 0.051; t(135)= 0.14, p >0.05); Disclosure of Intellectual and Human Capital (DIHC) had an insignificant negative effect on TQ (β3 = -0.994; t(135)= -0.69, p >0.05); and Disclosure of Natural Capital (DNC) had an insignificant negative effect on TQ (β4 = -0.438; t(135)= -0.41, p >0.05). Firms’ size (SIZE) and leverage (FLEV) had significantly controlled the influence of integrated reporting on TQ (F(6,129) = 24.08, Adj. R2 = .1636, p <0.05). The study concluded that integrated reporting is still at its early stage of adoption in Nigeria and could be useful in determining the firm’s value of listed manufacturing companies in Nigeria. It was recommended that regulators should increase awareness, training and provide a framework for the mandatory adoption of integrated reporting in Nigeria.
Keywords: Disclosure, Leverage, Size, firm’s value, integrated reporting, integrated thinking, tobin’s q. transformation, value creation