Reputational risk, ESG performance and the quality of Integrated Reporting: Empirical evidence

This study investigates the influence of negative media coverage around environmental, social and governance (ESG) issues on the quality of Integrated Reporting (IR) drawing upon legitimacy and media agenda setting theories. We specifically examine the top 100 South African companies listed on JSE in the 2013-2018 timeframe (342 firm-year observations). Our results reveal that IR quality is positively related both to peaks in ESG negative media coverage and to cumulative ESG negative media coverage, suggesting that companies adapt IR disclosure to respond to pressures – in terms of increased scrutiny and potential reputational damages – deriving from negative media coverage. Our findings extend previous knowledge on the determinants of IR quality in a context where integrated reporting is mandatory, and on the effects of ESG media coverage on reporting. Moreover, we add new evidence to the continuing debate on the role of media coverage in capital markets.