Jurnal Dinamika Akuntansi dan Bisnis Vol.
, 2023, pp 181 Ae 198 Exploring the Affiliation between Integrated Reporting and Firm Performance:
Evidence from Bangladesh Golam Shahria* Department of Business Administration.
BGC Trust University Bangladesh.
Chittagong.
Bangladesh *Corresponding author: g.
parveez@gmail.
https://dx.
org/ 10.
24815/jdab.
ARTICLE INFO
ABSTRACT
Article history:
The objective of this study is to assess the extent of integrated reporting (IR) practice with reference to the disclosure pattern and to examine its association with financial performance and market growth in the voluntary disclosure of manufacturing companies in Bangladesh.
Samples of this study are 41 manufacturing companies from nine different industries listed in Dhaka Stock Exchange (DSE).
The total observations were 123 firm year observations.
Using two-stage-least-squares approach to reduce endogeneity concerns, this study reveals that Integrated Reporting Index (IRDINX) is positively and significantly related with firm However, the relationship between IRDINX and growth is positive but The content analysis found an increasing pattern of IR disclosure by the sample firms.
The findings of this study encourage firms to adopt IR practice and add value to the existing literature as very few researches have been done on IR area in Bangladesh.
Received date: 15 December 2022 Received in revised form: 06 March 2023 Accepted: 04 April 2023 Available online: 14 June 2023 Keywords:
Content analysis, financial integrated reporting.
IIRC Menggali Hubungan antara Pelaporan Terintegrasi dan Kinerja Perusahaan:
Bukti Empiris dari Bangladesh Citation:
Shahria.
, .
Exploring the Affiliation between Integrated Reporting and Firm Performance: Evidence from Bangladesh.
Jurnal Dinamika Akuntansi dan Bisnis, 10 .
, 181 Ae 198 Kata Kunci:
Analisis konten.
IIRC, kinerja pelaporan terintegrasi ABSTRAK Tujuan dari penelitian ini adalah untuk menilai sejauh mana praktik pelaporan terintegrasi (IR) dengan mengacu pada pole pengungkapan dan menguji hubungannya dengan kinerja keuangan dan pertumbuhan pasar dalam pengungkapan sukarela perusahaan manufaktur di Bangladesh.
Studi ini melibatkan 41 perusahaan manufaktur yang terdaftar di Dhaka Stock Exchange (DSE) dari sembilan industri yang berbeda.
Jumlah observasi adalah 123 tahun-perusahaan.
Dengan menggunakan pendekatan two-stage-least-squares (OLS) untuk mengurangi masalah endogenitas, penelitian ini menemukan bahwa indeks pelaoiran terintegrasi (IRDINX) berhubungan positif dan signifikan dengan kinerja perusahaan.
Namun, hubungan antara IRDINX dan pertumbuhan adalah positif tetapi tidak signifikan.
Analisis konten terhadap pengungkapan perusahaan menemukan sejauh mana pengungkapan IR meningkat dengan pola perusahaan sampel.
Temuan dari penelitian ini dapat memotivasi perusahaan yang belum mempraktikan IR dan menambah literatur yang ada karena penelitian terkait IR di Bangladesh relatif masih sangat sedikit.
Introduction The present global world is highly based on technological devices and use of technology in business is emergence for corporate world.
Technology makes easy of communication of information for the stakeholders of enterprises.
As a result, todayAos stakeholders are now very aware sustainability, corporate governance of the business People are now raising voice on big and renowned corporate house about their social, environmental and welfare responsibility due to any natural disaster or any crisis moment of the countries as well as in the world.
Therefore, the demand of information about environmental performance, human resource practice, governance etc.
has been increased day by day by the stakeholders.
The performance measurement of the corporation is not Shahria / Jurnal Dinamika Akuntansi dan Bisnis Vol.
, 2023, pp 181 Ae 198 now evaluated only based on financial information but also social relation, environmental practice, use of intellectual assets, manufacturing facilities information, usages of human resources that are sought by stakeholders.
The enterprises that want to survive as good corporate world in long term, establishing and maintaining positive relationships with all stakeholders is essential.
Now, it is time to think how corporation provides their integrated information to their respective interested Integrated thinking is the process of actively considering the connections between the many operating and functional units of an organization and the capital that are used or One of the most recent trends in corporate reporting is integrated reporting (IR), which is a relatively new idea that is still being studied in various parts of the world (Hamad et al.
, 2.
integrated report (IR) is a concise communication of how an organization's strategy, governance, performance, and prospects, in light of its external environment, contribute to the generation of value over the short, medium, and long terms.
assimilates all material issues into a full story of value creation incorporating both financial and pre Ae financial issues.
Pre Ae financial means the factors that do not directly impact on the financial performance of an organization in the short Ae term will unavoidably have a financial impact over time as well as a long life in their business.
IR is now a volunteer discloser in most countries, although some of countries have taken initiative to impose the requirement as a compulsory requirement for business reporting.
FijaCkowska & Sobczyk .
found that the Integrated Report (IR) has the potential to develop into a cross-border business communication tool that would meet the demands of both the internal and external global environments.
Vaz et al.
, .
mentioned that integrated report is a corporate reporting model for sustainability information.
will make the corporate entities become more accountable and transparent to the lenders of capital and other interested parties, organizations are publishing their financial and non-financial performance in greater numbers.
IR will be more beneficial in terms of the public relations.
The growing demand for integrated information from stakeholders led to the creation of the International Integrated Reporting Council (IIRC) in August 2010.
IIRC has created an application architecture for integrated reporting that simplifies and directs how integrated reporting is facilitated in a global context.
A draft book of an application for international integrated reporting has been presented for debate on September 12, 2011 in this respect.
November 2012, a prototype was made public based on input from stakeholders and the 80 businesses that had participated in the pilot program.
The final publication date of this book is on December 9, 2013, which contains the Integrated Reporting Framework for the global world.
A good amount of research work has been conducted basically on reporting practices in Bangladesh based on financial reporting.
comprehensive study on financial reporting has been conducted by the World Bank (WB) Group.
It has been observed that the financial reporting practices in Bangladesh are deficient (World Bank, 2.
Shahria .
found that only 62.
6% of mandatory financial disclosures have been disclosed by the listed (Dhaka Stock Exchang.
manufacturing companies in Bangladesh.
Most of the empirical studies have investigated that financial reporting practices in Bangladesh are But IR practice is now an emergence issue in the corporate house in Bangladesh.
When a disclosure checklist in accordance with the International Integrated Reporting Framework (IIRF) has been distributed by the Institute of Chartered Accountants of Bangladesh, the process is IR will increase the number of users and help to become new investors and loyal customers as well as stakeholders for companies.
It also helps to attract foreign agencies to develop the capital market in Bangladesh.
Islam & Islam .
carried out a study on the multinational sector of Bangladesh for Shahria / Jurnal Dinamika Akuntansi dan Bisnis Vol.
, 2023, pp 181 Ae 198 the status of IR.
They found that the IR tendency has been increased year by year in the multinational sector of Bangladesh.
This researchAos prime objective is to investigate and examine the relationship of firm performance and growth with the IR disclosure practice among the listed manufacturing companies of Bangladesh.
The following are the sub Ae objectives of this study:
Investigates the sample firmsAo annual reports to explore the extent of their IR disclosure practice following the IIRCAos framework for IR.
Figure out the year to year change of the IR disclosure practice and change in the sample companiesAo reporting format.
Evaluate the year to year reporting practice of IR content elements among sample companies.
Examine the degree of relationship of performance and growth with IR disclosure practice among sample firms.
Literature Theoretical foundations The concept of IR adoption is to develop by discussing several theories in this section, which also strengthens the theoretical support of the findings of this study.
Institutional theory A theory on the more substantial and durable elements of social structure is known as institutional The institutional theory explains how companies respond to the contexts in which they The capacity to influence any corporation belongs to a variety of stakeholders, including nongovernmental organizations (NGO.
, and supply chain companies.
According to Scott .
, organizations must obey all of the rules, regulations and norms and culture that are usual in the society where they operate their business.
Moreover.
Adams et al.
, .
institutional theory has been used for understanding the frameworks employed by various businesses and organizations in their business Beck et al.
, .
suggests that the compliance of institutional prevailing formal rules, regulations and norms will create more legitimacy for organizations to their stakeholders.
According to Adams & Whelan .
, the bulk of studies and theoretical theories that have been utilized to examine the voluntary disclosure of non-financial information have found that companies frequently act selfishly, particularly when aiming to maximize financial outcomes like profit.
Most of the institutions have contributed to the advancement of integrated reporting, both alone and jointly.
On the other hand.
Carpenter & Feroz .
found that the connection between corporations adopting a specific framework in respect to its rivals in the result of pressure from external parties in the business environment.
Therefore.
Camilleri, .
discovered that the integration of financial and environmental, social & governance (ESG) disclosure demand has been increasing in the marketplace by the stakeholders.
Legitimacy theory In general, institutional regulators will provide various regulatory frameworks for their respective entities to disclose financial and non Ae financial information in the annual reports.
A strong institutional environment will create a good number of legitimate entities in the country.
Beck et al.
suggested the stakeholders believe that a responsible organization will be a legitimate organization because they have to comply with all relevant societal rules that prevail in the countries.
According to Higgins et al.
, in order to establish themselves as industry leaders, some firms adopt the IR framework more quickly than other companies in their industry.
Camilleri .
stated that an organization can acquire legitimacy through strong relationships with external stakeholders.
As a result, organizations try to adopt and change their corporate reporting practice according to their stakeholdersAo expectations.
According to Vitolla et Shahria / Jurnal Dinamika Akuntansi dan Bisnis Vol.
, 2023, pp 181 Ae 198 .
, legitimacy theory and the IR exposy are They make the argument that businesses with higher market values frequently provide more information on their governance, social, and environmental performance in order to justify their actions in society.
Agency theory and internal pressure Currently, it is very clear that they have differences between ownership and control of In the twentieth century, it was considered that business owners were principals and they hire executives .
to manage their business.
Ness & Mirza .
mentioned that the central principle of agency theory is that principals should give agents permission to act on their behalf.
Therefore, governance is the crucial issue in agency theory.
So, the extent of voluntary disclosure is also influenced by the agency theory.
Because agents are faced facing various pressure from the principals due to of disclosing non - financial information in the corporate report.
The principals expect relevant and reliable information from their agents, which ensures quality information.
According to Beretta & Bozzolan's .
, investors may place greater value on information quality than quantity.
Consequently, following the agency theory, the incorporation of the vision & mission of the firm, corporate strategy, future outlook, probable future risks, opportunities, strength and weakness of the companies in the form of an integrated report will enhance the quality of corporate disclosure.
Hasan et al.
find that it negatively influences firmsAo sustainability reporting decisions by concentrated ownership, managerial ownership, and foreign ownership.
These study findings provide valuable insight to Pakistani policymakers for identifying the attributes that require regulatory focus to achieve the public policy objective of sustainable development.
Hamad et al.
proposed a conceptual framework that could be very useful, which can be assisted by public limited companies (PLC.
having sustainability practices to adopt the IR framework, reduce information asymmetries, increase information transparency, and create value.
Mishra et al .
conducted on an empirical study on companyAos perception regarding integrated reporting in India and they find that there are three major components impacting their perception are Ae concise reporting, effective and transparent reporting and finally, better decisionmaking.
The majority of companies have a positive opinion about IR practice in India.
The following hypothesis have been developed from the theoretical and empirical studies for this study.
Hypotheses development Kolk .
and KPMG .
discovered that corporate reporting strives to inform stakeholders of an organization's performance.
Over the past two decades, voluntary disclosure, a component of this communication process, has increased dramatically.
Integrated reporting is a clear form of voluntary disclosure that focuses on adding value and sharing that value with interested users.
This IR disclosure information can be used by stakeholders for longterm assessment of improvement of the respective companyAos sustainability as well as to identify possible uncertainties.
IR focuses on creating value and better allocating corporate resources, particularly financial the assumption is that implementing IR will improve financial results.
This relationship has been found in some previous studies found in different Dey .
investigates the factors that affect integrated reporting (IR) in the context of voluntary adoption and how it relates to firm value and Barth et al.
found a positive association between the firm's valuation and projected cash flows, together with IR and stock Using a sample size of 822 from 2010 to 2013.
Lee & Yeo .
established a positive Adegboyegun et al, .
carried out a study in Nigeria.
This study looked at how integrated reporting affected company performance between Shahria / Jurnal Dinamika Akuntansi dan Bisnis Vol.
, 2023, pp 181 Ae 198 2009 and 2018.
According to Albetairi et al.
Return on Assets (ROA) of five Bahraini listed insurance businesses is negatively but significantly connected with risk, opportunity, and performance characteristics, but favorably and highly correlated with the business model, strategy, and resource Above all value studies and their findings, it is reasonable to be assumed that IR disclosure is associated with a companyAos superior financial This guided to the prime hypothesis to be tested in this study as follows: H1: There is a positive relationship between firm performance and IR disclosure.
Firm performance can be evaluated based on financial & operational performance and market growth.
Islam, .
used market growth as a firm performance measurement tool.
In this study firm performance have been examined from financial and operational and market growth.
Financial and operational performance Profitable firms try to disclose their positive financial signs to the stakeholders.
The generalized hypothesis is that the return on assets (ROA) and return on equity (ROE) have positive relations with firmsAo disclosure practice.
The comparison of the ROA and ROE ratio, compared to which one ratio is more effective compared to the other, is not clearly established under any fundamental theory or Only ROA has been used in some of the studies and also only ROE has been used as a profitability measure.
Ulupui et al.
, .
& Dey .
used only ROA and Menicucci .
used only ROE as a measure of profitability.
Some authors have used both as measures.
Rahman et al.
examined the annual reports of the listed pharmaceutical and chemical companies in Bangladesh and discovered a positive correlation between ROA.
ROE, and intellectual capital disclosure.
Islam .
investigates the relationship of IR voluntary disclosure with ROA and ROE of 20 listed companies in Bangladesh.
Kurniawan & Wahyuni .
demonstrated the positive impact of profitability related to the level of information sharing by the company.
Pavlopoulos et al.
, .
identified that profitability is a prominent determinant, and has a significant positive impact on IR.
From the above studies and their findings, the following hypotheses have been developed and H2: There is positive relationship between ROA and IR disclosure practiced in Bangladesh by manufacturing sector.
H3: There is positive relationship between ROE and IR disclosure practiced in Bangladesh by manufacturing sector.
Performance of market growth Another important indication of corporate performance is market performance.
The growth in market share is to be used to measure market Market performance measures the expansion of the possibilities of the value of shares in the future.
The ratio of the current market price to its book value is used to calculate market growth.
is to be a platform for presenting an enterprise financial position and the allocation of funds which will create an image in the capital market.
Therefore.
IR will create a great avenue in the capital market for sources of funds for businesses.
It can be assumed that IR disclosure practice and market growth have positive relationships.
According to Beaver, et al.
, .
, extra disclosures are effective in capturing the cross-sectional variations in market to book ratios for bank equities.
Abuzayed, et al.
, .
evaluated the components that create the gap between market value and book value for bank valuation.
Sharma, et al.
, .
believe that Market-toBook ratio is a common measure of firm value for over two decades and it emphasizes the reflecting of efficiency and growth of firmsAo value.
Dey .
discovered that IR disclosure practice and market to book value ratio has a significant positive relationship between them in the banking sector of Bangladesh.
Based on the above-mentioned Shahria / Jurnal Dinamika Akuntansi dan Bisnis Vol.
, 2023, pp 181 Ae 198 literature and their findings, the following hypothesis has been erected to test in this study:
H4: There is positive relationship between market growth and IR disclosure practiced in Bangladesh by manufacturing sector.
Control variables Two control variables have been considered in this present study while developing the research model, such as size of the firm and financial According to Lee & Yeo .
, the primary determinants of IR are firm age, firm size, sales growth, and profitability.
Busco et al.
identified that the factors of integrated thinking and reporting are board-size, board meeting frequency, firm size, leverage, and sensitive industries, which are influenced by preparing a higher quality integrated report.
Another study by Vitolla et al.
found that a significant positive association between profitability, size, leverage and IR quality in financial institutions.
Dey .
and Rahman et al.
have used the natural logarithm of the firm's total assets as a control variable of firm size and to regulate the impact of the firm's size on the IR disclosure index.
Financial leverage is another variable that controls the impact of the debt-to-equity ratio on the IRDINX.
An investigation found that there are fewer studies that have been conducted in the field of Integrated Reporting basically in terms of association between levels of IR disclosure & firm performance in Bangladesh.
Islam & Islam .
conducted a study on eleven listed multinational sectors of Bangladesh to just find out the degree of IR disclosure of material non-financial information that has been disclosed by sample companies.
Another study has found that Shahria .
carried out a study on seven listed non Ae bank financial institutions of Bangladesh to examine the software has been used for research analysis utilizing multivariate regression.
extent of IR disclosure for value creation.
These studies just found the magnitude of IR disclosure in a specific industry.
Islam .
evaluated the relationship between IR voluntary disclosure and financial performance of only twenty companies from all listed companies in Bangladesh and the author claimed that it is the first study in Bangladesh to examine the relationship.
Generally, there are two categories of companies found in Bangladesh, such as the manufacturing sector and the service sector.
From the earlier discussion, it is shown that there is no study conducted on any specific sector, which could be increased and motivate each other for IR practicing in their respective industries as well as in that sector.
The present study makes attempts to fill some of the gaps in research and it will contribute original research on affiliation of IR disclosure and firm performance of manufacturing companies in Bangladesh.
Research method Manufacturing firms registered in the Dhaka Stock Exchange (DSE) in 2019 are the population of this study.
The samples were selected using convenient sampling techniques.
There are nine industries that have been taken as sample industries out of ten industries in the manufacturing sector of Bangladesh.
A three-year study period has been considered in this study, consisting of 2018 Ae 2019, 2019 Ae 2020, and 2020 Ae 2021.
There are 41 listed manufacturing companies that have been selected conveniently from nine different industries .
ee the list of sample companies in appendix -.
This gives of 123 firm years observation of the robust pooled Ae OLS regression.
In order to capture the association between firm performance and growth with the IR disclosure practices in Bangladesh by manufacturing organizations, three distinct research models have been built in this study and SPSS To assess the endogeneity problems, a two-stage least squares technique is also used.
The first research model is described as follows:
IRDINXit = 0 1ROAit 2FIRMSIZEit 3LEVit Ait Shahria / Jurnal Dinamika Akuntansi dan Bisnis Vol.
, 2023, pp 181 Ae 198 The second research model is as follows:
IRDINXit = 0 1ROEit 2FIRMSIZEit 3LEVit Ait The third research model is as follows:
IRDINXit = 0 1GRWTit 2FIRMSIZEit 3LEVit Ait In this study, one dependent, three independent, and two control variables were employed.
Integrated Reporting Index (IRDINX) is designated as a dependent variable on the model mentioned above.
In multivariate regression, the constant is 0 and the independent (ROA.
ROE.
GRWT) and control variables (FIRMSIZE and LEV) have coefficients of 1- 3.
On the annual reports of the study's sample manufacturing businesses, a content analysis was The most popular technique for evaluating pre-financial information reporting is content analysis (Gray et al.
, 1.
According to Krippendorff .
the use of content analysis enables accurate inferences to be made from data in light of the context.
To know the IR practice of the selected companies, a unique AuIntegrated Reporting Disclosure Index (IRDINX)Ay is constructed as a checklist .
from the content elements of IR framework for this study .
ee the checklist in the Appendix -.
If a sample company disclosed checklist related information of IR in their annual report it is assigned a score of 1, otherwise 0.
The following mathematical formula can be used to build the dependent variable (IRDINX):
IRDINX =
Ocycu yc=1 ycUycnyc ycuyc The aforementioned equation indicates that nj is the firm's jth item's number.
Xij =1 if the ith item is disclosed, 0 if ith item is not disclosed, so that 0 OIRDINXj O1.
In this study, operational performance, financial performance, and market growth performance will each be measured using independent variables (ROA.
ROE.
GRWT).
Control element GRWT is calculated as the ratio of market value to book value and FIRMSIZE is the natural log of the firm's total In this study, i and t stood for the firms and time, respectively, and A represented the random The detail information of all variables has been provided in the Table Ae 1.
Table 1.
Description of variables Acronym
IRDINX
Definition Integrated reporting disclosure index Operationalization Type Number of items Dependent disclosed divided by the maximum possible score .
Net income to total Independent Reference Krippendorff .
Vitolla et al.
Dey .
ROA Return on assets ROE Return on equity Net income to total Independent Menicucci .
Vitolla et al.
GRWTH
Growth of the firm Market value to book value of share Independent FIRMSIZE Size of the firm Natural logarithm of the firm total asset Control Beaver et al.
Abuzayed et al.
Dey .
Lee & Yeo .
Busco et al.
Vitolla et al.
Adegboyegun et al.
Ulupui et al.
, .
and Dey .
Shahria / Jurnal Dinamika Akuntansi dan Bisnis Vol.
, 2023, pp 181 Ae 198
LEV
Financial leverage Debt to equity ratio Control Vitolla, et al.
Busco et al.
Results and discussion Descriptive statistics analysis a full breakdown of the content-wise reporting status Table 2 includes the mean, standard deviation, by sample firms, which is the sub-index in this study.
minimum and maximum scores acquired as well as Table 2.
Descriptive information of IR disclosure index
Variable Name
Integrated reporting disclosure index
Organizational External environment Governance Business model
Risks & opportunities Strategy & resource Performance Outlook
Basis of preparation & General reporting Symbol
Mean
Mean
IRDINX
OOV
GOV
SRA
PEF
BPP
GPG
The Performance sub-index reached reporting status at 70%, possibly as a result of the need for financial performance data under the Companies Act.
Securities and Exchange Rules, and International Accounting Standards (IAS), among other regulations.
Figure 1 shows a graphic representation of the calculated mean index scores for ease of comparison.
Figure 1 shows that IRDINX obtained a mean score of 45%, which will remain stable between 2019 and 2020.
But IRDINX means the score flashes in 2021 by reaching 48%.
There have been significant improvements occurring this The reason behind this is that all listed firms must comply with the BSEC Corporate Governance Code (CGC) of 2018, which was released by the Bangladesh Securities and Exchange Commission (BSEC) on December 31, 2019.
It also proved that the reporting year 2019 Ae 2020 was the initial stage Sd.
Min Max for following CGC.
The reason remains stable in 2018 Ae 2019 and 2019 Ae 2020.
But it seems that in the second reporting year, 2020 Ae 2021, reporting status increased by 3%.
Another reason might be that the Institute of Chartered Accountants of Bangladesh (ICAB) has introduced a prestigious Award for the best presented annual report and best presented integrated report each year.
This renowned award will give stakeholders more confidence in the company's sustainability image.
The minimum IRDINX score is 25% compliance, which means that a company minimum of 25% IR information is disclosed in their annual report.
On the other hand, the IRDINX maximum mean score is 90%, implying that none of the sample companies did fully disclose IRD in their annual report.
But it is very promising that 90% of IR voluntary information has been disclosed by some of the sample firms.
Shahria / Jurnal Dinamika Akuntansi dan Bisnis Vol.
, 2023, pp 181 Ae 198 Figure 1.
Graphical presentation of IR status The overall mean disclosure score of IR practices in Bangladesh is found to be 48% in this It appears that among the sample businesses, 52% of the IR information required by IIRC requirements is still not included in the annual Islam & Islam .
reports that in the years 2013, 2014, and 2015, the proportion of IR disclosure was 69%, 77%, and 79%, respectively, from analysis of 11 large multinational companies' annual reports for the sample period of 2013Ae2015, which are listed on the DSE.
Another study found that 60% IR information have been disclosed by DSE seven non Ae bank financial institution of Bangladesh (Shahria, 2.
Islam .
also found that 65.
97%, 65.
83% and 69% of IR information have been disclosed by the 20 DSE listed companies in 2016, 2017 and 2018 Figure 2.
Integrated reporting mean index score of content elements The author also concludes that approximately 68% of IR information provided by the sample firms in Bangladesh.
However, this study focuses on sectorial IR reporting practice with most recent disclosure practice in large sample size of Bangladesh.
This research will provide fresh IR practicing information to the interested users.
The summary bar chart in Figure 2 makes the findings of Table 2 easier to grasp.
It is obvious that the majority of content components' information is below 50%.
Shahria / Jurnal Dinamika Akuntansi dan Bisnis Vol.
, 2023, pp 181 Ae 198 which suggests that Bangladesh's implementation of long-term viability of a company.
However, the IR has not yet achieved a sufficient level.
positive and auspicious things to notify that the The disclosure pattern of the examined annual Performance (PEF).
Organizational Overview reports has a number of areas that might be (OOV).
Basis of Preparation & Presentation (BPP).
The mean score for strategy and resource External Environment (EE).
Outlook (OL).
Risks & allocation (SRA) was about 22%, which is not an Opportunities (RO) viewing mean score are 70%, acceptable or adequate result in terms of the overall 66%, 53%, 48%, 43% and 41% respectively.
These score for the other indices.
This indicates that the indices have shown an upward trend during the sample companies are not currently motivated to sample year, suggesting that sample firms have share their short-, medium-, and long-term plans' started to embrace the IIRC standards for optional IR objectives combined with a strategy for allocating disclosure and that this adoption will accelerate Inadequate disclosure about the General among Bangladeshi enterprises in the near future.
Reporting Guideline (GRG).
Governance (GOV).
Firm performance and control variables and Business Model are further issues of concern Table 3 summarizes the detail information about (BM).
The sample businesses' GRG index mean score of 33% shows that they are unwilling to firm performance and market growth variables.
The mean score of ROE shows 6.
67% with a maximum discuss key difficulties, future targets, etc.
72% and a minimum -120%, which implies that a provide investors a clear knowledge of how the wide variation occurred during study period in the company is handling its material issues, it must be ROE among the sample firms.
However, the median properly addressed.
Operating culture serves as the ROE of 4.
8% shows that majority of the study basis for governance, and BM adds value to the These two factors are more crucial for the enterprises' ROE rates were just fair.
Table 3.
Descriptive statistics of firm performance and control variables Variable name Symbol Obs.
Mean Sd.
Min Max Med.
Return on asset Return on equity Growth of sample firm .
arket value to book valu.
Size of sample firm
Financial leverage ROA
ROE
GRWT
FIRMSIZE
FLEV
The mean score of ROA is 4.
7%, and the maximum obtained is 71% and the minimum is 26%, median score is 2.
20%, which denotes that most of the sample firm generate moderate ROA during study period.
It is noted that sample firms faced COVID Ae 19 financial crises during study On the other hand, firmAos growth mean score 41, the maximum ratio is 20.
64 and the minimum ratio is 0.
The average firm size of the sample firms is 78, the maximum size is 26.
61, minimum size is 08 and median score is 22.
9, which implies that there is very little variation in total assets of the sample firms.
The debt-to-equity ratio is used to assess the financial leverage in this study.
The majority of the firms use more debt than equity in their capital structure, as shown by the average financial leverage of the capital, which is determined to be 0.
47, the lowest is 0, the highest is 3.
51, and the median is 0.
The minimum value 0 indicates the positive thing that one of sample firm did not use any debt.
use only equity in the capital source.
Bivariate analysis Table 4 shows the relations of dependent variable, independent variables and control variable Shahria / Jurnal Dinamika Akuntansi dan Bisnis Vol.
, 2023, pp 181 Ae 198 by using Pearson Correlation matrix along with ROE and IRDINX is both statistically significant variance inflation factor (VIF).
Table 4 demonstrates and positive.
It suggests that the sample businesses' a substantial positive association between ROA and enhanced IR practice will result from an increase in the IRDINX, suggesting that greater firm success ROE.
In this study, a proximate indicator of encourages greater IR disclosure in the sample businesses' growth has been the market value to businesses' annual reports.
The correlation between book value of equity ratio.
Table 4.
Correlation among variables Variables IRDINX
ROA
ROE
GRWT
FIMSIZE
LEV
IRDINX
ROA
ROE
GRWT
FIMSIZE
FLEV
VIF
Note: significant at 5% Although there is a favorable relationship with any collinearity problems, the Variance Inflation IRDINX, it was shown to be statistically Factor (VIF) should be 5 or below.
(Hair et al.
The firm size control variable, which 2.
measured by natural logarithmic form of the total Gujarati .
, suggest that a VIF of less than assets of the sample firms, which shows significant 10 implies that the specific independent variable positive correlation with IRDINX.
It makes perfect employed in the regression model does not have a sense for a company with more assets to want to serious multicollinearity issue.
Since VIF values of disclose everything possible in their annual reports all independent variablesAo .
ee the table .
are less in order to appear more valuable to stakeholders.
than five, this means that independents variable used Financial leverage also shows positive correlation in this study are free from any severe with IRDINX, which denotes that levered firms want multicollinearity problems.
to disclose more about their voluntary information at Empirical results After addressing the issue of heteroskedasticity.
Previous study showed an insignificant negative the robust pooled-OLS regression has been used to correlation of leverage with IR disclosure (Islam, explore the three distinct models in this section.
It is surprising that all independent variables refers to the situation when the variance of the and control variables are positively correlated with dependent variable IRDINX, which are statistically model's errors is different for each observation, despite the fact that one of the fundamental tenets of significant except growth and financial leverage.
modeling is frequently that the variances are The possibility of any collinearity problem among the independent variable is tested in this homogenous and the errors of the model are uniformly distributed.
the table 4 lists the calculated VIF.
According to general guidelines.
For the purpose of avoiding Table 5.
Result of regression of model 1 Dependent variable (IRDINX) Constant P Ae value ROA Model 1 (ROA) Model 1 (ROA) Model 1 (ROA) Shahria / Jurnal Dinamika Akuntansi dan Bisnis Vol.
, 2023, pp 181 Ae 198 P Ae value t statistics Firm size P Ae value t statistics FLEV P Ae value t statistics Observation R Square White Test for Heteroskedasticity Tests of endogeneity (Ho: variables are exogenou.
059*** Durbin .
Wu-Hausman F.
p = 0.
p= 0.
p= 0.
Note: Level of significance: ***1%, **5%, *10% Model 1 ROA, which is utilized as a measure of operational success and is shown in Table 5, has a substantial positive association with the study's dependent variable (IRDINX).
It has an excellent coefficient 480, indicating that an increase of 1 unit in the ROA by the sample business would result in an increase in the IR index mean score of 0.
Profitable companies that are enlightened strive to retain their legitimacy and sustainability by using better transparency practices like internal reporting (IR).
Adams & Whelan .
examine the voluntary disclosure of non-financial information have found that companies frequently act selfishly, particularly when aiming to maximize financial outcomes like profit by the bulk of studies and theoretical theories.
This is stated in the institutional theories of the above literature.
Islam .
discovered almost identical evidence, and Dey .
discovered a positive but negligible association between IR disclosure and ROA using two-stage least squares .
SLS) estimate in the banking sector of Bangladesh Additionally.
Table 5 demonstrates that the t statistic is less than 1.
96 and the p value is less than 0.
indicating that hypothesis 2 is accepted.
The correlation between company size and IRDINX is positive and statistically significant, as shown in Table 5.
The sample firms' coefficient of company size is 0.
059, meaning that if sample businesses raise their total assets by one unit, the IR disclosure index score will increase by 0.
059 units.
Financial leverage has a poor and negligible correlation with the index of IR transparency.
It can result in some form of limitation on voluntary disclosure items from the viewpoint of equity and debt sources for that highly leveraged The ROE in model 2 is used as an indicator of financial performance for this study.
Table 6 shows that the coefficient of ROE is positive and statistically significant, which indicates that higher returns will lead to a higher volume of voluntary IR disclosure.
Higgins et al.
stated in the legitimacy theories that some firms adopt the IR framework more quickly than other companies in their industry for establishing themselves as industry leaders, when they earned more profit.
Table 6.
Result of regression of model 2 Dependent variable (IRDINX) Constant P Ae value ROE P Ae value t statistics Firm size Model 2 (ROE) 345**** Model 2 (ROE) - 0.
057***
Model 2 (ROE) 057*** Shahria / Jurnal Dinamika Akuntansi dan Bisnis Vol.
, 2023, pp 181 Ae 198 P Ae value t statistics FLEV P Ae value t statistics Observation R Square White Test for Heteroskedasticity Tests of endogeneity (Ho: variables are exogenou.
Durbin .
Wu-Hausman F.
p = 0.
p = 0.
p = 0.
Note: Level of significance: ***1%, **5%, *10% According to Yuliawati & Sukirman .
, the supporting results, hypothesis 3 is accepted.
Firm corporation will provide more CSR information as a size has a positive and significant correlation with IR result of its increased profitability.
Profitable firms disclosure and financial leverage has a negative and want to convey their positive message to their insignificant correlation with IR disclosure, which is stakeholders as well as to society.
According to the similar with model 1.
empirical findings of this study and previous studies Table 7.
Result of regression of model 3 Dependent variable (IRDINX) Constant P Ae value GRWT P Ae value t statistics Firm size P Ae value t statistics FLEV P Ae value t statistics Observation R Square White Test for Heteroskedasticity Tests of endogeneity (Ho: variables are exogenou.
Model 3 (GRWT) Model 3 (GRWT) - 1.
064***
Durbin .
Wu-Hausman F.
Model 3 (GRWT) - 1.
065***
p = 0.
p = 0.
p = 0.
Note: Level of significance: ***1%, **5%, *10% Table 7 shows the relationship of firmsAo growth and the IR disclosure index in detail.
The coefficient of firmsAo growth and firm size is positive and statistically significant.
The large firm size indicates a strong financial position in the market.
they want to present this strong situation to their investors, potential investors, creditors in a complete form of reporting like the IR framework.
The coefficient of growth is positive but statistically insignificant with the IR disclosure index.
The financial leverage, the coefficient is negative and statistically insignificant.
But three variables ran simultaneously, observed that the coefficient of growth is positive and statistically significant, which means that growth is influenced by other control variables.
Dey .
discovered that growth has a positive and significant relationship with IR disclosure but financial leverage has a positive but insignificant relationship with IR Therefore, hypothesis 4 (H.
cannot be accepted according to the findings of this study and previous research results.
From the above discussion on model 1, 2 and 3, all the hypothesis regarding firm performance is accepted except hypothesis H4 .
Therefore.
Shahria / Jurnal Dinamika Akuntansi dan Bisnis Vol.
, 2023, pp 181 Ae 198 the prime hypothesis H1 can partially accepted and can conclude that firm performance measured in operating and financial is positively related to IR disclosure but growth performance is negatively related with IRDINX among the sample firms in this Suttipun, .
concluded in their study that manufacturing capital reporting has positive relation with financial performance but environmental capital reporting is negatively related with financial performance of 150 listed companies.
Another study conducted on 171 sample companies and found that profitability and company size have a positive & significant impact on integrated reporting.
stakeholder pressure has a positive & insignificant impact on integrated reporting.
profitability and stakeholder pressure have a positive & significant impact on investor reactions.
firm size and integrated reporting have a positive & insignificant impact on investor reactions.
(Ulupui et al.
, 2.
It is also found by Dey .
that IR disclosure has positive relation with firm value but negative relation with stock liquidity.
Therefore, the mixed findings on the relationship of firm performance and IR disclosure practice with large sample size in the corporate annual reports are justified by previous findings of But Islam .
found that a positive relationship among all three variables with the IR disclosure, which is conducted on only 20 sample The diverse parameters under which the specific research was conducted led to varying R squared is a measure of goodness-of-fit for linear regression models.
It provides a measure 0Ae100% scale to quantify the strength of the relationship between the model and the dependent The value of R squared of all three models within the 0 -100% scale.
According to Wong .
, ycI 2 =0.
75 is substantial, ycI 2 =0.
50 is moderate and ycI 2 =0.
25 is weak.
Therefore, the relationship of all three models is moderate.
Heteroskedasticity result of all three models implies that the variance of the errors does not depend on the values of the independent variables.
Finally, all three models achieved all condition of the classical linear regression model without violating any conditions.
Furthermore, it is also observed that the value of endogeneity test is greater than p .
value in all three models.
Therefore, there is no endogeneity problem in this study.
Conclusions Bangladesh is now a fast-growing country due to an increasing trend of GDP in Asia as well as the Most of the export Ae oriented companies are involved in the manufacturing sector.
A good number of listed manufacturing companies export their quality products across the countryAos border.
a result, the number of employees of manufacturing companies increased day by day, not only the companies that export but also those companies that are trying to export to the foreign market.
Therefore, the interest in non Ae financial performance information of these firms has been growing in recent years.
This study tried to explore the relationship between IR disclosure practice and firm performance of the manufacturing sector in Bangladesh.
The finding of the study is that IR practice in Bangladesh has grown in recent years by the listed manufacturing sample companies.
It may be caused that ICAB issued an IR checklist as per the IR framework.
BSEC issued CGC and the pressure of the stakeholders on the needs.
The content analysis based on the extent constructed by IRDINX found that the extent of disclosure percentage by sample firms is 45%, 45% and 48% in the years 2018 -2019, 2019 -2020, 2020 -2021 respectively.
The overall percentage of IR disclosure practice in this study is 46%, other IR studies in Bangladesh found 68% by (Islam, 2.
, 60% by (Shahria, 2.
and 75% by (Islam & Islam, 2.
It is noted that the mean IR disclosure score in this study is low compared to the previous studies, due to the large sample size compared to theirs and it also shows that the disclosure pattern patter from industry to It is also found that only 6 out of 41 sample firms are following the framework as per the Shahria / Jurnal Dinamika Akuntansi dan Bisnis Vol.
, 2023, pp 181 Ae 198 required format.
It is also revealed that the Chairman's Report.
Director's Report.
Corporate Governance Report, and the Notes to the Financial Statements contain the majority of the information about IR.
There are four hypotheses that have been tested by three cross Ae sectional regression models.
ROA and ROE exposed the positive and statistically performance and adoption of IR disclosure practices in Bangladesh in the manufacturing sectorsAo But the market growth .
arket Ae to-book valu.
independent variable has to show a positive relationship but is statistically insignificant.
This result has been supported by various previous studies Almost one Ae third of the listed manufacturing companies are in textiles, which are export Ae orientated, but IR practice status in this industry is not significant.
BSEC can focus on this industry to motivate them to increase their IR It is hopeful that BangladeshAos firms have taken initiative to address IR voluntary reporting practice, which has increased year to year The results of this study will enable decision-makers to assess the degree to which integrated thinking is occurring and affecting the manufacturing sector's choice and presentation of The regulatory agencies that oversee the listing of firms can acquire important findings from this study about whether IR practices should be implemented in Bangladesh alongside financial This study makes an effort to fill some knowledge gaps and research gaps in the realms of integrated reporting.
BSEC can issue a checklist of IR in line with IIRC like ICAB, which will be compulsory for all listed companies in Bangladesh.
Therefore, all listed firms will be able to measure both the financial and non-financial performance through IR, which will be the long-term perspective and future orientation for value creation.
Stakeholders can harmonize the corporate information with the business model associating performance with the strategic objectives, which can provide more transparency.
References