Financial analysts' reaction to voluntary integrated reporting: cross-sectional variation in institutional enforcement contexts

European countries are likely to increasingly adopt integrated reporting (IR) voluntarily, after the 2014/95/EU Directive is revised and other initiatives are implemented. Therefore, the present study contributes insights on the relevance of IR in voluntary contexts by exploring analysts’ reactions to the release of integrated reports in diverse institutional settings. Design/methodology/approach – Drawing on voluntary disclosure theory, a quantitative empirical research method is used to explore the moderating role of country-level institutional characteristics on associations between voluntary IR release and analyst forecast accuracy and dispersion. Findings – IR informativeness is not uniform in the voluntary context and institutional settings play a moderating role. IR release is associated with increased consensus among analyst forecasts. However, in countries with weak institutional enforcement, a reverse association is detected, indicating that analysts rely largely on IR where the institutional setting strongly protects investors. Although a strong institutional setting boosts the IR release usefulness in terms of accuracy, it creates noise in analyst consensus. Research limitations/implications – Academics can appreciate the usefulness of voluntary IR across the institutional enforcement contexts. Practical implications – Managers can use these findings to understand opportunities offered by IR voluntary release. The study recommends that policymakers, standard setters and regulators strengthen the institutional enforcement of sustainability disclosure. Originality/value – This study is a unique contribution to recent calls for research on the effects of nonfinancial disclosure regulation and on IR “impacts”. It shows on the international scale that IR usefulness for analysts is moderated by institutional patterns, not country-level institutional characteristics.

Purpose European countries are likely to increasingly adopt integrated reporting (IR) voluntarily, after the 2014/95/EU Directive is revised and other initiatives are implemented. Therefore, the present study provides insights on the relevance of IR in voluntary contexts by exploring analysts' reactions to the release of integrated reports in diverse institutional settings. Design/methodology/approach Drawing on voluntary disclosure theory, a quantitative empirical research method is used to explore the moderating role of country-level institutional characteristics on the associations between voluntary IR release and analyst forecast accuracy and dispersion. Findings IR informativeness is not uniform in the voluntary context and institutional settings play a moderating role. IR release is associated with increased consensus among analyst forecasts. However, in countries with weak institutional enforcement, a reverse association is detected, indicating that analysts rely largely on IR where the institutional setting strongly protects investors. Although a strong institutional setting boosts the IR release usefulness in terms of accuracy, it creates noise in analyst consensus. Research limitations/implications Academics can appreciate the usefulness of voluntary IR across the institutional enforcement contexts. Practical implications Managers can use these findings to understand opportunities offered by IR voluntary release. The study recommends that policymakers, standard setters and regulators strengthen the institutional enforcement of sustainability disclosure. Originality/value This study is a unique contribution to recent calls for research on the effects of nonfinancial disclosure regulation and on IR "impacts". It shows on the international scale that IR usefulness for analysts is moderated by institutional patterns, not country-level institutional characteristics.