Integrated Reporting quality and reputational risk: empirical evidence

This study investigates the relationship between negative media coverage around environmental, social and governance (ESG) issues and the quality of Integrated Reporting (IR) drawing upon legitimacy and media agenda setting theories. We examine the top 100 South African listed companies in the 2013-2018 timeframe. Our results reveal that IR quality is positively related to ESG negative media coverage. Thus, companies that are more exposed to media pressures issue higher quality IR consistent with the company need to face scrutiny and potential reputational damages. Our findings extend previous knowledge on factors explaining IR quality in a mandatory IR context and the relationship between media coverage and reporting practices. Moreover, we add fresh evidence to the continuing debate on the role of media coverage in capital markets. Consistent with our findings, regulators, standard-setters and policymakers should consider developing guidelines to help companies prepare high-quality IR without offering vague or misleading information. Such a reflection is especially urgent in contexts where non-financial disclosure and IR is mandatory.