Measuring the integrated reporting quality in Europe: balanced scorecard perspectives

• Utilizing a sample of 147 listed firms across 18 EU countries, this research constructs a disclosure index based on the Balanced Scorecard (BSC) to reflect the content of integrated reports.
• The study delves into the theoretical backgrounds of integrated reports, drawing on agency, signaling, stakeholder, and legitimacy theories to explain the motivations behind and benefits of integrated reporting. It highlights the increasing importance of nonfinancial reporting in response to corporate failures and regulatory changes promoting transparency.
• The research findings indicate a positive trend in both the adoption and quality of integrated reports among EU firms, with Integrated Reporting Quality (IRQ) increasing significantly over the observed period.

This study by Omar Hassan Ali Nada and Zsuzsanna Győri explores the adoption and quality of integrated reports (IR) in the European Union (EU) from 2013 to 2020. Utilizing a sample of 147 listed firms across 18 EU countries, the research constructs a disclosure index based on the Balanced Scorecard (BSC) to reflect the content of integrated reports. The study reveals a significant increase in Integrated Reporting Quality (IRQ) over the study period, with financial disclosures receiving the most focus, followed by learning and growth perspective disclosures. The utility sector displayed the highest IRQ scores, while Spain led in IR adoption rates. The research introduces a novel method of assessing IRQ by linking BSC with the IR framework, offering a comprehensive view of how companies balance financial and non-financial information in their reports.

The study delves into the theoretical backgrounds of IR, drawing on agency, signaling, stakeholder, and legitimacy theories to explain the motivations behind and benefits of integrated reporting. It highlights the increasing importance of nonfinancial reporting in response to corporate failures and regulatory changes promoting transparency. By evaluating IR from a quality perspective, the study addresses a significant gap in the literature, providing insights into the evolution of IR practices within the EU. This research is the first to examine IRQ in the EU by integrating BSC with IR elements, enhancing understanding of corporate disclosure practices and their alignment with broader organizational goals and stakeholder expectations.

The research findings indicate a positive trend in both the adoption and quality of IR among EU firms, with IRQ increasing significantly over the observed period. The study suggests that companies leverage IR to address information asymmetry and enhance stakeholder engagement, improving their legitimacy and operational transparency. However, despite these advancements, the study notes that the overall proportion of companies adopting IR remains low, and there are considerable differences in IRQ across countries and sectors. The study concludes by highlighting its contributions to both theory and practice, offering a new method for assessing IRQ and calling for further research into the factors influencing IR adoption and quality. It also identifies limitations and potential areas for future investigation, including exploring IRQ outside the listed European firms and in different geographical contexts.

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