The influence of corporate governance mechanisms on integrated reporting quality in Malaysia

Integrated reporting (IR) has increased as a new approach combining financial and non-financial information to enable shareholders and other stakeholders to determine how a business creates value. This research investigates the association between corporate governance mechanisms (board of directors, audit committee, separate risk management, and ownership structure) and integrated reporting quality (IRQ). The study’s sample comprised 173 integrated reports of 64 Malaysian companies from year 2017 to 2020. A content analysis approach was used to determine the integrated reporting quality level, and Panel Corrected Standard Errors (PCSEs) were employed for hypothesis testing. Empirical results show that integrated reporting in Malaysia is moderately high based on average, and Malaysian companies are improving their integrated reporting quality. The results also indicate that board size and meetings were positively and significantly associated with IRQ. Conversely, board expertise and gender are not significantly associated with IRQ. Moreover, the board independence was negative and not significantly associated with IRQ. Furthermore, audit committee size, independence, and audit chair expertise significantly and positively influence the IRQ. In contrast, the results showed that the risk management committee is negative and insignificant with IRQ. Moreover, the audit committee’s expertise was negative but significant. Regarding audit committee meetings, it is found to be negative but not significantly associated with IRQ. Finally, the study revealed that family ownership concentration was negative but significantly associated with IRQ. Regarding foreign ownership concentration, the results of the current study showed that there is significant but not positive. Government ownership was strongly positive and significant with IRQ. This study serves as an essential reference for regulatory bodies, policymakers, and standard setters, offering insights into enhancing the quality of integrated reporting and understanding the impact of corporate governance characteristics on the integrated reporting quality of companies.