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

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 companys 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.