The Determinants of Forward-Looking Information in Integrated Reporting: An Empirical Investigation in Europe

The aim of this paper is to investigate the effect of firm characteristics on forward-looking disclosure (FLI) within the context of Integrated Reporting (IR). The study assesses the extent of FLI provided in Integrated Reports of European organizations and empirically fills the research gap into the topics of FLI disclosed in the IR. A manual content analysis is run to investigate the level and the topics of FLI in 132 Integrated Reports available in the International Integrated Reporting Council web site. A disclosure index composition consisting of 27 information items is developed from the list of content elements comprised in the Integrated Reporting Framework (IIRC, 2013). Three hypotheses are proposed and eight Models are tested within a multivariate regression analysis in order to explore the effects of three main variables (firm size, profitability and leverage) on FLI. The study confirms that firms are reluctant to provide FLI in Integrated Reports. The results show that profitability and firm size have a statistically significant relationship with the level of specific topics of FLI. Conversely, leverage is found to be insignificant in explaining the extent of FLI. The results provide comprehensive insights into the current forward-looking disclosure practices of early adopters in Integrated Reports. The research adds to the prior disclosure literature concerning FLI since acquired results are ambiguous. There are a very restricted number of studies that have explained the variation of FLI in the light of firm characteristics and no study has analyzed this research topic within the context of IR.