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Stock market performance enhanced through integrated reporting

Companies can significantly enhance their stock market performance by adopting integrated reporting (IR) and combined assurance (CA) practices, according to new research from Murdoch University.

The research underscores the importance of transparency and accuracy in financial reporting.

Companies that use integrated reporting consider non-financial information such as human, governance, social and environmental inputs—not just the financial bottom line—to deliver a more complete picture of performance. Combined Assurance ensures companies consider all factors in assessing risk.

Dr. Augustine Donkor from Murdoch Business School led the study and said the results can be implemented to guide companies towards longer-lasting success.

"Integrated reporting and combined assurance can benefit companies aiming to improve their market performance," Dr. Donkor said.

"Our findings highlight the critical role of transparency and accuracy in building investor trust.

"By doing so, companies can build stronger investor confidence and achieve sustainable growth.

"The research provides valuable insights for companies, investors, and policymakers aiming to improve financial reporting practices."

Key findings included:

• Integrated reporting (IR): Combining financial and non-financial information, such as sustainability metrics, into a single report boosts investor trust and makes a company's stock more attractive.
• Earnings management (EM): Companies with higher levels of earnings management experience increased scrutiny through CA, which not only ensures the accuracy and reliability of their financial reports but can also detect and potentially reduce such practices.
• combined assurance (CA): Implementing CA enhances the credibility of reports, leading to better stock market performance.

The study is titled "The role of integrated reporting and earnings management on the combined assurance and capital market liquidity relationship" and was in the Asian Journal of Accounting Research. The research was co-authored by Dr Terri Trireksani, Head of Accounting and Finance at Murdoch University's Business School, and Professor Hadrian Geri Djajadikerta from Curtin University's School of Accounting, Economics and Finance.