The value relevance of integrated reporting in the United Kingdom

Abstract

Purpose – This study aims to examine the value relevance of integrated reporting (IR) in the UK using a sample of Top 100 London Stock Exchange-listed firms from 2011 to 2018. Design/methodology/approach – Financial data were sourced from the Refinitiv database, with other disclosure information hand-collected from available sources. This study used panel estimated generalised least squares to examine the association between voluntary IR and firm value. Findings – The findings reveal no significant association between IR and firm value, casting doubt on its usefulness in voluntary settings and challenging International Integrated Reporting Council’s (IIRC) claim that IR enhances shareholder value. The results emphasise the importance of firm-specific financial and operational factors, such as leverage, profitability, sales growth and dividend pay-out, in driving firm value. The negative relationship between capital expenditures and firm value highlights inefficiencies in investment strategies, whereas firm size and loss-making status appear less significant. The positive effect of industry sensitivity underscores the value of transparency and stakeholder engagement in certain sectors. Originality/value – Although existing studies have examined the value relevance of IR in different settings, this study provides new insights into this relationship, by investigating the value relevance of IR in the UK, a country, which is considered the home base of IIRC, yet has a voluntary IR setting. The results show that voluntary IR lacks value relevance in the UK, as investors prioritise firm-specific characteristics and mandatory disclosures. Policymakers should reassess the role of voluntary IR and explore mandating or incentivising its adoption to increase its effectiveness and impact.