Textual dimensions of sustainability information, stock price informativeness, and proprietary costs: Evidence from integrated reports
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Date
2024-10-23
Open Access Location
Journal Title
Journal ISSN
Volume Title
Publisher
Elsevier Ltd on behalf of the British Accounting and Finance Association
Rights
(c) 2024 The Author/s
CC BY-NC-ND 4.0
CC BY-NC-ND 4.0
Abstract
We examine whether integrated report quality, IRQ, is negatively associated with stock price synchronicity, an inverse measure of firm-specific information, and the extent to which the relation between IRQ and synchronicity is attenuated by proprietary costs. We measure IRQ using machine-based textual analysis along four dimensions: textual attributes, topical content, integrated reporting capitals, and financial versus sustainability information. We find that measures of IRQ based on seven textual attributes are negatively related to synchronicity, which is consistent with higher quality text containing more firm-specific content. Using PhraseLDA to identify topics in integrated reports, we find that contents related to the three most common categories—governance, performance, and risks and opportunities—are negatively associated with synchronicity. We find similar results for all integrated report capitals, except manufactured capital. Further, we find that sustainability information has a larger negative association with synchronicity than financial information. We also find that proprietary costs stemming from product market competition attenuate the association between IRQ and synchronicity, which suggests the informativeness of integrated reports varies with a firm's competitive environment. Our results may inform the International Sustainability Standards Board as it considers the role of the Integrated Reporting Framework in developing sustainability standards.
Description
Keywords
Integrated reporting, Sustainability reporting, Firm-specific information, Stock price synchronicity, Non-financial disclosure
Citation
Barth ME, Cahan SF, Chen L, Venter ER, Wang R. (2025). Textual dimensions of sustainability information, stock price informativeness, and proprietary costs: Evidence from integrated reports. British Accounting Review. In Press.