The Effect of Integrated Reporting Adoption on Earnings Quality: Evidence from a Difference-in-Differences Analysis

This study examines the effect of integrated reporting (IR) adoption on earnings quality, addressing ongoing debates on whether IR represents a substantive improvement in financial reporting or a symbolic disclosure practice. Using a quasi-experimental design, the study employs a difference-in-differences (DiD) approach alongside matched sample analysis to identify the causal impact of IR adoption. The sample consists of publicly listed firms observed over multiple years, comparing IR adopters with non-adopters before and after adoption.

Earnings quality is measured using discretionary accruals, where lower values indicate higher reporting quality. The results show that IR adoption is associated with a statistically and economically significant reduction in discretionary accruals, suggesting improved earnings quality. These findings remain robust after controlling for firm characteristics, applying propensity score matching, and conducting multiple robustness tests, including alternative earnings quality measures and parallel trend analyses.

The results support predictions from agency, stakeholder, and signaling theories, indicating that enhanced disclosure and accountability under integrated reporting constrain managerial opportunism. This study contributes to the literature by providing causal evidence on the reporting consequences of IR adoption and offers important implications for regulators, standard setters, and corporate managers regarding the role of integrated reporting in improving transparency and reporting discipline. Ding rigorous causal evidence on the financial reporting implications of integrated reporting adoption.