Impact of Integrated Reporting Disclosure Level on Value Relevance of Accounting Information - Evidence from Listed Companies in Sri Lanka

Abstract

The introduction of Integrated Reporting Framework by IIRC addressing the need of governing the disclosure of Non – Financial information in corporate annual reports significantly enhanced the accounting information’s value relevance. However, some studies concluded that <IR> disclosures do not enhance the value relevance of accounting information. Hence, the current study validates those contradictory ideas & concludes how <IR> impacts accounting information’s value relevance in the Sri Lankan context. For that purpose, the current study selected 38 listed companies considering four years of study periods. The <IR> disclosure level measured using “<IR> Disclosure checklist” and accounting information’s value relevance measured using proxy measure of the “firm value” by taking the market price per share six months after each financial year ends. This study found that there is an increasing trend among the listed companies in the selected sample in terms of <IR> disclosures. However, the extended price model revealed the increasing level of <IR> disclosures negatively impacted on firm value or accounting information’s value relevance. The signaling theory considered in this study justified that corporate report user’s reaction to the signals provided through integrated reports with increased level of disclosures resulted in such negative impact regardless of the quantity of information provided through <IR>. Hence, this study contributes to the current literature by justifying the negative impact of <IR> disclosures on accounting information’s value relevance from signaling theory perspective.