Impact of Integrated Reporting on Firm Value: Empirical Evidence from Licensed Finance Companies in Sri Lanka.

Abstract

Integrated reporting focuses on creating value for the firm's stakeholders in the short, medium, and long term. This concept discloses both financial and non-financial information to the firm's stakeholders. However, there is a contradictory argument about the impact of integrated reporting on firm value, and there is a dearth of research on how integrated reporting impacts firm value in the Sri Lankan context. Therefore, this study aims to investigate how integrated reporting impacts firm value by controlling for firm size using empirical evidence from licensed finance companies in Sri Lanka. To conduct this study, 10 licensed finance companies in 2016-2022 were selected from the Colombo Stock Exchange (CSE) using the simple random sampling technique. The independent variable in this research is integrated reporting. Firm value is the dependent variable, and firm size is the controlling factor. Multiple regression analysis was used to identify the impact of integrated reporting on the firm value. According to this study, integrated reporting had a significant and negative impact on firm value. Further, it provides evidence that integrated reporting is still not creating considerable value for the firms in a Sri Lankan Context. The reason is that firms have limited advantages from integrated reporting due to stakeholders' lack of understanding and the significant costs associated with implementing it at lower levels. As a result, policymakers and managers should re-think the integrated reporting adaptation and convert it to the concept of creating value for the firm.