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Value relevance of accounting information under an integrated reporting approach: A research note
Jönköping University, Jönköping International Business School, JIBS, Business Administration. Jönköping University, Jönköping International Business School, JIBS, Center for Family Enterprise and Ownership (CeFEO).
Jönköping University, Jönköping International Business School, JIBS, Business Administration.ORCID iD: 0000-0001-9055-950X
2016 (English)In: Journal of Accounting and Public Policy, ISSN 0278-4254, E-ISSN 1873-2070, Vol. 35, no 4, 437-452 p.Article in journal (Refereed) Published
Abstract [en]

This research note aims to enrich our understanding regarding the market valuation implications of financial reporting under an Integrated Reporting (IR) approach. In order to do so, we focus on the Johannesburg Stock Exchange (JSE) and we examine whether the value relevance of summary accounting information (i.e., book value of equity and earnings) of firms listed on the JSE has enhanced after the mandatory adoption of an IR approach under the King III Report. Our study can be seen as a response to the recent calls for a closer investigation of the usefulness of the new reporting trend for investors. More specifically, our study can be seen as a response to the stance taken by the International Integrated Reporting Council (IIRC) Framework that the adoption of an IR approach improves the usefulness of financial reporting for investors. For our empirical tests we utilize a sample of 954. firm-year observations and employ a linear price-level model which associates a firm's market value of equity with its book value of equity and earnings. In line with the IIRC Framework's expectations, we find strong evidence of a sharp increase of the earnings' valuation coefficient. However, contrary to the Framework's stance, our results indicate a decline in the value relevance of net assets. Such a decline may be imputed to risks and/or unbooked liabilities that are revealed or measured more reliably after the introduction of an IR approach on the JSE. It should be noted, however, that despite its cause, the decline in the value relevance of net assets can be seen as a further argument in favor of the IIRC stance to assign equal importance to a wide range of "capitals," such as human, social and natural capital. We believe that our findings are of particular interest to a wide range of regulators, standards setters, practitioners, and academics but first and foremost to the JSE and IIRC.

Place, publisher, year, edition, pages
2016. Vol. 35, no 4, 437-452 p.
National Category
Business Administration
Identifiers
URN: urn:nbn:se:hj:diva-31672DOI: 10.1016/j.jaccpubpol.2016.04.004ISI: 000381840100005Scopus ID: 2-s2.0-84963976261OAI: oai:DiVA.org:hj-31672DiVA: diva2:958295
Available from: 2016-09-06 Created: 2016-09-06 Last updated: 2016-10-04Bibliographically approved
In thesis
1. Essays on the market valuation implications of mandatory corporate reporting
Open this publication in new window or tab >>Essays on the market valuation implications of mandatory corporate reporting
2016 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

The purpose of this dissertation is to enrich understanding on the market valuation implications of mandatory financial and non-financial reporting beyond and in relation to traditional accounting information. It is comprised of four individual essays each of which examines a different, and to some extent internationally unique, jurisdiction that can best serve the particular purpose of the essay as well as the overarching purpose of the dissertation.

The starting point of this empirical inquiry is the value relevance of purchased goodwill under IFRS and the moderating role that different levels of compliance with IFRS mandatory disclosures play on its market valuation. Similar to the first essay, the second essay focuses on traditional accounting information (specifically book value of equity and earnings) and examines potential differences on its market valuation before and after the mandatory introduction of an integrated reporting approach. The third essay focuses on mandatory carbon emissions reporting and compares its valuation relevance when such reporting is mandated by regulation vis-à-vis when it is voluntary. Finally, the fourth essay examines the market valuation interplay between mandatory financial and non-financial disclosures.

This dissertation intends to be of particular relevance first; to the accounting academic community which acknowledges that mandatory disclosures are not well understood and it calls for further research on how users of annual reports view mandatory disclosures and second; to accounting regulators. Empirical research on the value relevance of corporate reporting can provide useful insights into questions of interest to regulators because its research questions are often motivated by broader questions raised by these non-academic constituents. The dissertation in hand has similar motivations.

Place, publisher, year, edition, pages
Jönköping: Jönköping University, Jönköping International Business School, 2016. 48 p.
Series
JIBS Dissertation Series, ISSN 1403-0470 ; 109
National Category
Business Administration
Identifiers
urn:nbn:se:hj:diva-31675 (URN)978-91-86345-68-6 (ISBN)
External cooperation:
Public defence
2016-09-14, B1014, Jönköping International Business School, Jönköping, 13:00 (English)
Opponent
Supervisors
Available from: 2016-09-06 Created: 2016-09-06 Last updated: 2016-09-07Bibliographically approved

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