A framework to enhance integrated reporting through the quantification and valuation of non-financial capitals : a study of companies listed on the Johannesburg Stock Exchange

Abstract

The measurement of the impact of non-financial capitals on company value within the context of integrated reporting (IR) has remained an elusive empirical and practitioner question. The IR framework was designed to provide an improved corporate reporting approach to different stakeholders. However, the framework falls short of providing a tool that practitioners and stakeholders could use to determine how company value has changed over time. The main objective of this research was to produce an enhanced IR framework through an Augmented Integrated Reporting Model (AIRM), which was validated through panel data fixed effects regression models. The model tested the relationship of five capitals (financial, manufactured, intellectual, human, and social and relationship capitals) to company value. Through quantitative research methodology that utilised panel data fixed effects regression analysis in EViews software, the effect of each capital on company value was assessed. The AIRM demonstrates that social and relationship capital have a positive impact on market share price, EVA and TobinQ, while association to share price at book value is negative. Human capital has a positive relationship to market share price and a negative influence on EVA, TobinQ and share price at book value. Intellectual and manufactured capital have positive associations with the four dependent variables of company value. The findings of the study are in line with the IR concept, which states that capital may add, preserve, or diminish company value over time. Positive relationships mean the capital added value, while negative relationships mean company value was reduced. This research implies that a contribution has been made in resolving the challenge of quantifying and measuring non-financial capitals and how they impact company value. The study recommends that IR report preparers, report analysts, investors, academics and other relevant stakeholders use the AIRM to measure and manage the various capitals in the process of company value creation.