Determinants of Integrated Reporting: a Test Based on Sustainability Ratings

In the field of corporate disclosure a new reporting format has gained momentum: the so-called “Integrated Report” (IR). It embeds typical contents of sustainability and financial reports into a single document, aiming to provide a unique representation of how an organization creates value over time. In spite of its voluntary nature, a growing number of firms are adopting IR by participating in the International Integrated Reporting Committee (IIRC) project. Motivated by recent calls for research on the conditions associated with IR adoption, the paper aims to understand whether the decision to adopt an IR stems from particular needs related to poor legitimation. Drawing on previous studies on the use of voluntary disclosure as a symbolic practice, we consider Bloomberg’s sustainability ratings as a measure of firm public exposure and show that IR early adopters have significantly higher sustainability scores relative to non-adopters. Our results reject the hypothesis of firms using voluntary disclosure as a response of a poor rating. This evidence questions the use of legitimacy theory to explain IR adoption and calls for future investigation on reasons behind corporate engagement with this innovative reporting format.