The level of european companies’ integrated reports alignment to the framework: The role of boards’ characteristics

Abstract

In terms of corporate governance, the board of directors (BoDs) is the main responsible structure in meeting and safeguarding both shareholders and stakeholders’ interests. Integrated reporting’s primary aim is to improve information quality provided to shareholders while responding to stakeholders’ interests and needs. Using lenses of stakeholder theory, this study explores the relationship between board of directors’ characteristics as size, gender diversity, activity, tenure, outside directors, chief executive officer (CEO) duality and the Integrated Reports alignment level to the International Integrated Reporting Committee (IIRC) framework, using a self-constructed disclosure index. Applying a content analysis method, data were collected from integrated reports to determine the self-constructed disclosure index (Integrated Reporting Score-IRS). Through quantitative analysis, we analyzed which BoDs’ characteristics are correlated to IRS. The analyzed sample was formed of 98 integrated reports produced by 61 European companies, published on the IIRC website for the period 2013-2017. The current study contributes to existing knowledge by exploring the voluntary adoption of integrated reporting using quantitative analysis and focusing on the European context. The obtained results highlight that integrated report alignment levels with IIRF is directly correlated with the proportion of outside directors on the board and longer board tenure. Results show a higher alignment for reports produced by two-tier or mixed boards than the unitary ones. Additionally, there is a constant improvement in alignment score, with a statistical difference occurring in 2016 compared to 2013.