Integrated Reporting - Is it value relevant? : A quantitative study on Johannesburg Stock Exchange

Sammanfattning: Background and Problem: Recently the focus of information has been discussions’ regarding what information to provide in order to satisfy the stakeholders as well as investors. During the last decades, the primary interest of corporate information has initially been the shareholders, but this is now shifting. The stakeholders demand more than just the information in the financial statement, and until now the non-financial information has been included in a standalone sustainability report. The new reporting system, which represents all information combined into one single report, is called Integrated Reporting. This mandatory reporting requirement is enforced by the South African government, for all companies listed on Johannesburg Stock Exchange’s Main Board. Therefore, this thesis will focus upon whether integrated reporting has given any value-relevance for a company under the mandatory requirement, contrary to the voluntary requirements. Additionally, it will be observed if integrated reporting contributes to a company’s market value. Purpose: The purpose of this thesis is to examine and investigate the value-relevance of integrated reporting for the market values of companies listed on Johannesburg Stock Exchange’s Main Board, in South Africa. Delimitations: This thesis limits itself to investigate companies listed on the Johannesburg Stock Exchange’s Main Board. Further on, this thesis is limited to investigate disclosure of environmental and social factors of integrated reporting interconnected with the manufacturing and producing sectors, excluding all sectors of financial and service related characteristics. Method: This thesis is solely a quantitative study. The data for 2009 and 2011 is gathered from the companies’ integrated annual reports. The self-constructed disclosure index of environmental and social factors is classified by “GRI G3 and G3.1 Update-Comparison sheet”, in order to define integrated reporting. This was followed by using a valuation model in order to determine the relationship between integrated reporting and a company’s value-relevance. Empirical Results and Conclusion: The empirical results show that the disclosure of level of compliance has increased from 2009 to 2011. The level of compliance differs between the sectors and characterizes to what extent integrated reporting is incorporated. The analysis of this thesis shows that the differences in voluntary and mandatory requirements reflect the level of compliance. The concluding remark of this thesis is that environmental and social aspects of integrated reporting are value relevant for a company’s market value under the requirement of King III.