The Value Relevance of Business Model Disclosure Quality in Integrated Reports

Purpose: Despite the vast array of literature on integrated reporting, there is scant empirical evidence on the value relevance of the specific content elements of integrated reports. This paper investigates whether a specific content element of integrated reports, namely, business model disclosure quality influences the share price of South African listed companies. Business model disclosure was selected because it is integral to all stakeholders in understanding companies’ value creation processes to make informed decisions. Design/Methodology/Approach: The value relevance was tested using the Ohlson (1995) Model through the application of panel data. A new proxy was used for the “other information” variable in the Ohlson (1995) Model for business model disclosure. Two scenarios were evaluated: one sample included profit-making and loss-making companies (350 observations) and another sample of profit-making companies (260 observations) for five years from 2016 to 2020. Findings: The results for both scenarios indicated that the quality of business model disclosure had no effect on the share price of South African listed companies. Originality/Value: The paper makes four contributions to the existing literature. Firstly, analysing the value relevance of one specific component of integrated reports, namely, business model disclosure. Secondly, using a new a proxy for business model disclosure to incorporate into the Ohlson (1995) Model. Thirdly, the paper provides empirical evidence on the value relevance of one of the critical elements of integrated reports of companies that have a mandatory requirement to publish integrated reports. Fourthly, two samples were analyzed: one sample of profit-making and loss-making companies and another sample of profit-making companies.