Edited by Sabri Boubaker, Douglas Cumming and Duc K. Nguyen
Chapter 28: The effect of publication, format and content of Integrated Reports on analysts’ earnings forecasts
Integrated Reporting (IR) has recently emerged as an accounting innovation that combines financial and non-financial/sustainability information relevant to corporate value creation in a single report. While prior research on IR examined the supply side (i.e., motivation for and content) of IR, this study focuses on the demand side of IR. We specifically investigate whether IR strengthens financial analysts’ earnings forecasts and what aspects of IR influence better forecasting. For this purpose, we conduct (1) a within-firm analysis from a sample of IR early adopters to measure the difference between the pre- and post-levels of forecast dispersion following the IR release and (2) a between-firm matching analysis to test whether an IR release is indeed associated with a lower dispersion. We examine 156 IR adopters from 18 countries in 2014 and 2015, matched with 95 non-IR firms selected as a control group. The results show that a single IR (type 3) decreases the post-level of forecast dispersion of IR firms with a smaller pre-forecast dispersion in comparison with the control group. Moreover, IR completeness and detail are associated with the post-level of forecast dispersion of IR firms with smaller pre-forecast dispersion, while IR accountability (reporting more negative issues) and length have no effect on it. Our findings suggest that an IR presenting more content elements and more detail may decrease uncertainty about a firm’s information environment and therefore strengthen analysts’ decisions.
You are not authenticated to view the full text of this chapter or article.
Elgaronline requires a subscription or purchase to access the full text of books or journals. Please login through your library system or with your personal username and password on the homepage.
Non-subscribers can freely search the site, view abstracts/ extracts and download selected front matter and introductory chapters for personal use.
Your library may not have purchased all subject areas. If you are authenticated and think you should have access to this title, please contact your librarian.