The Impact of Integrated Reporting on Firm’s Performance: Comparison between Financial and Non-Financial Listed Companies in Sri Lanka

Abstract

The purpose of this study is to examine the impact of IR adoption on the firm’s performance of Financial and Non-Financial public listed companies (PLCs) in the Colombo Stock Exchange (CSE) Sri Lanka and observe the disclosure pattern of integrated reporting (IR). For this quantitative study, sample panel data were collected from the integrated annual reports of 56 PLCs (23 financial PLCs and 33 non-financial PLCs) published from 2018 to 2022. The level of IR adoption (IRDIN) was used as the independent variable, while Return on Assets (ROA), Return on Equity (ROE), and total sales growth (GRO) are considered the financial, operational, and growth variables respectively. Tobin’s Q and Price Earning (PE) ratio were selected as market-related variables. The control variables were Firm size (FIRMSIZE) and Leverage (LEV). Descriptive analysis was performed in this study with the help of Eviews latest version and Robust regression analysis was employed to analyze the impact of the level of IR adoption on firms’ performance. Findings deduced from the empirical results show that IRDIN positively and significantly impacts all four performance variables (ROA, ROE, GRO, Tobin’s Q) of non-financial PLCs. IRDIN on Financial PLCs positively and significantly affected financial (ROA) and operational (ROE) based variables. Furthermore, the content analysis shows an increasing pattern of revealing the indicator elements constructed by the sample PLCs.This study adds value to the existing limited literature on IR disclosure and firm performance in Sri Lanka by incorporating content analysis and regression analysis to understand how firms respond to the stakeholders' demand for value creation. Using data mining and applying big data analytics of annual reports in eXtensible Business Reporting Language (XBRL) format are highly promising for future research.