The value relevance of integrated reporting quality: the role of the legal environment

Since its inception, research on Integrated Reporting (IR) has progressed along multiple paths. Yet two critical questions remain underexplored: (1) whether the quality—rather than mere adoption—of IR is value relevant, and (2) how the legal environment might moderate this relationship. This study addresses these gaps using a panel dataset of 78 IR adopters, identified as leading practices by the International Integrated Reporting Council, over the 2017-2020 period. The findings contribute to the IR literature in two ways. First, building on the relatively underexplored theoretical perspective of proprietary cost theory, this study integrates it with agency theory to analyze the impact of IR disclosure quality. The study shows that IR quality has a positive association with firm value, illustrating that quality matters above and beyond adoption alone. Second, the study complements agency theory with neo-institutional theory to further investigate the relationship between IR disclosure quality and capital market outcomes. Results demonstrate that this relationship is moderated by the legal context: it is stronger in countries (a) where IR is voluntary and (b) with civil law legal systems. These insights suggest that regulators should not only encourage IR adoption but also nudge higher-quality disclosures. Aware of these benefits, managers may further fine-tune IR quality to maximize its impact on the firm’s market value.