The power of integrated reporting: market responses and the role of corporate reputation

Abstract This study investigates the market reaction to the adoption of Integrated Reporting (IR) among businesses listed on the Indonesia Stock Exchange, as well as the function of corporate reputation as a moderating factor. Descriptive analysis indicated no significant corporate reputation, size, or leverage differences between IR adopters and non-adopters. Companies that implemented IR, on the other hand, showed better growth and more positive market response, as measured by the Cumulative Abnormal Return (CAR), compared to non-adopters. The investigation undertaken before and after the COVID-19 pandemic yielded consistent results, with IR adoption positively influencing the market response regardless of the period. Hypothesis testing utilizing the Common Effect model demonstrated that IR adoption had a beneficial impact on the market response, consistent with the Signaling Theory, which emphasizes the benefits of transparent and thorough reporting. However, the company’s reputation, as measured by the company’s Image Index (CII), had no meaningful impact on the market reaction to IR and did not mitigate the association between IR adoption and the market response. These data imply that while the market rewards IR for its transparency, a company's previous reputation has little impact on this perception. This research has substantial consequences for businesses, investors, and standard setters. Companies are encouraged to use IR to improve market perception and garner favorable investors’ responses. Investors should regard IR adoption as a key component in their investment decisions. Policymakers should promote IR practices to increase market transparency and efficiency.