The Contingent Impact of Integrated Reporting on Cost of Equity: Evidence from Good Corporate Governance Moderators in Indonesia
Keywords:
Integrated Reporting, Cost of Equity, Good Corporate Governance, Independent Board of Commissioners, Institutional Ownership
Abstract
This study analyzes the effect of Integrated Reporting (IR) on the Cost of Equity (COE) by examining the moderating role of Good Corporate Governance (GCG) mechanisms in companies listed on the Indonesia Stock Exchange (IDX) for the 2020-2024 period. Governance quality is operationalized through two key mechanisms: institutional ownership and the proportion of independent board of commissioners. Employing Process Hayes Model 2 with bootstrap iterations of 5,000, and a final sample of 323 company-year observations after outlier removal, the study finds that Integrated Reporting does not exert a significant direct influence on Cost of Equity. However, the proportion of independent board of commissioners significantly moderates the negative relationship between Integrated Reporting and Cost of Equity, while institutional ownership fails to produce a significant moderating effect. Notably, under conditions of high institutional ownership paired with a low proportion of independent commissioners, Integrated Reporting paradoxically increases the Cost of Equity, underscoring the critical role of internal governance mechanisms in establishing the credibility of disclosed information. These findings confirm that the effectiveness of Integrated Reporting in reducing Cost of Equity is contingent upon the quality of the governance environment- particularly board independence. The study contributes to both theory and practice by demonstrating that the economic benefits of Integrated Reporting are realized only when accompanied by robust independent oversight structures.
References
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Alshirah, M. H., Abdul Rahman, A., & Mustapa, I. R. (2020). Board of directors’ characteristics and corporate
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Barth, M. E., Cahan, S. F., Chen, L., & Venter, E. R. (2017). The economic consequences associated with integrated report quality: Capital market and real effects. Accounting, Organizations and Society, 62(5), 43–64. https://doi.org/10.1016/j.aos.2017.08.005
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Blackwell, J., & Morrison, T. (2023). Corporate governance, integrated reporting and capital market outcomes: A cross-country analysis. Journal of International Accounting Research, 28(1), 67–89.
Bose, S., Shams, S., Ali, M. J., & Mihret, D. (2021). COVID-19 impact, sustainability performance and firm value: international evidence. Accounting & Finance, 62(1), 597–643.
Botosan, C. A. (2006). Disclosure and the cost of capital: What do we know? Accounting and Business Research, 36(SPEC. ISS), 31–40. https://doi.org/10.1080/00014788.2006.9730042
Chen, X., Harford, J., & Li, K. (2007). Monitoring: Which institutions matter? Journal of Financial Economics, 86(2), 279–305. https://doi.org/10.1016/j.jfineco.2006.09.005
Cosma, S., Schwizer, P., & Soana, M. . (2022). The impact of integrated reporting on capital markets: Evidence from Europe. Meditari Accountancy Research, 30(4), 1021–1045.
De Villiers, C., Hsiao, P. C. K., & Wang, Z. (2023). The evolving research on integrated reporting. Accounting & Finance, 63(1), 683–722. https://doi.org/10.1111/acfi.12918
Estrada, J. (2007). Mean-semivariance behavior: Downside risk and capital asset pricing. International Review of Economics & Finance, 16(2), 169–185.
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International Business Review, 26(5), 959–975. https://doi.org/10.1016/j.ibusrev.2017.03.004
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Lee, K. W., & Yeo, G. H. H. (2020). Integrated reporting and firm value: Evidence from an emerging market.
Asian Review of Accounting, 28(3), 361–381.
Lee, K. W., & Yeo, G. H. H. (2016). The association between integrated reporting and firm valuation. Review of Quantitative Finance and Accounting, 47(4), 1221–1250. https://doi.org/10.1007/s11156-015-0536-y
Luo, L., & Tang, Q. (2021). Corporate governance and carbon performance: Role of carbon strategy and awareness of climate risk. Accounting & Finance, 61(2), 2891–2934.
Mazzotta, R., Bronzetti, G., & Veltri, S. (2023). Integrated reporting and firm value: The moderating role of institutional context. Journal of Appled Accounting Research, 24(1), 89–110.
Melloni, G., Caglio, A., & Perego, P. (2017). Saying more with less? Disclosure conciseness, completeness and balance in Integrated Reports. Journal of Accounting and Public Policy, 36(3), 220–238. https://doi.org/10.1016/j.jaccpubpol.2017.03.001
Menicucci, E., & Paolucci, G. (2022). Board characteristics and integrated reporting quality: Evidence from European firms. Corporate Social Responsibility and Enviromental Management, 29(5), 1833–1849.
Mohmad, Z., Noor, M., & Shaari, R. (2020). Good governance and sustainability in corporate sector: An evidence from developing markets. International Journal of Industrial Management, 7(1), 1–9.
Pavlopoulos, A., Magnis, C., & Iatridis, G. E. (2019). Integrated reporting: An accounting disclosure tool for high quality financial reporting. Research in International Business and Finance, 49, 13–40. https://doi.org/10.1016/j.ribaf.2019.02.007
Pham, P. K., Suchard, J., & Zein, J. (2012). Corporate Governance and the Cost of Capital: Evidence from Australian Companies. Journal of Applied Corporate Finance, 24(3), 84–93. https://doi.org/10.1111/j.1745-6622.2012.00392.x
Pinto, L., & Raúl, B. (2020). Does ESG performance influence the cost of equity? Evidence from European firms. Corporate Social Responsibility and Enviromental Management, 27(6), 2681–2694.
Raimo, N., Caragnano, A., Zito, M., Vitolla, F., & Mariani, M. (2021). Extending the benefits of ESG disclosure: The effect on the cost of debt financing. Corporate Social Responsibility and Enviromental Management, 28(4), 1412–1421.
Ramirez, A., & Gonzalez, C. (2021). The moderating effect of corporate governance on the relationship between integrated reporting and cost of capital. Corporate Governance: An International Review, 29(5), 445–467.
Robertson, F. A., & Samy, M. (2015). Factors affecting the diffusion of integrated reporting – a UK FTSE 100 perspective. Sustainability Accounting, Management and Policy Journal, 6(2), 190–223. https://doi.org/10.1108/SAMPJ-07-2014-0044
Sharif, H., Naeem, M. A., & Shahzad, F. (2022). Role of Analyst Following in the Relationship between Integrated Reporting Quality (IRQ) Disclosure and Cost of Equity Capital in Developed Markets. Universal Journal of Accounting and Finance, 10(6), 938–952. https://doi.org/10.13189/ujaf.2022.100603
Steyn, M. (2014). Organisational benefits and implementation challenges of mandatory integrated reporting: Perspectives of senior executives at South African listed companies. Sustainability Accounting, Management and Policy Journal, 5(4), 476–503. https://doi.org/10.1108/sampj-11-2013-0052
Takahashi, K., Yamamoto, H., & Chen, L. (2022). Board characteristics, integrated reporting quality and capital market benefits: Evidence from Asian capital markets. Journal of Asian Business Studies, 16(3), 412–435.
Velte, P. (2022). Archival research on integrated reporting: a systematic review of main drivers and the impact of integrated reporting on firm value. Journal of Management and Governance, 26(3), 997–1061. https://doi.org/10.1007/s10997-021-09582-w
Vitolla, F., Salvi, A., Raimo, N., Petruzzella, F., & Rubino, M. (2020). The impact on the cost of equity capital in the effects of integrated reporting quality. Business Strategy and the Environment, 29(2), 519–529.
Zhou, S., Simnett, R., & Green, W. (2017). Does Integrated Reporting Matter to the Capital Market? Abacus, 53(1), 94–132. https://doi.org/10.1111/abac.12104
Albitar, K., Hussainey, K., Kolade, N., & Gerged, A. M. (2020). ESG disclosure and firm performance before and after IR: The moderating role of governance mechanisms. International Journal of Accounting & Information Management, 28(3), 429–444.
Alshirah, M. H., Abdul Rahman, A., & Mustapa, I. R. (2020). Board of directors’ characteristics and corporate
risk disclosure: the moderating role of family ownership. EuroMed Journal of Business, 15(2), 219–252. https://doi.org/10.1108/EMJB-09-2019-0115
Aswath, D. (2002). Aswath Damodaran - Investment Valuation_ Tools and Techniques for Determining the Value of Any Asset, -Wiley (2002). John Wiley & Sons.
Atkins, J., & Maroun, W. (2020). The naturalistic mimicry of disclosure practices: Moral emotions and integrated reporting. Accounting, Auditing & Accountability Journal, 33(3), 520–547.
Barth, M. E., Cahan, S. F., Chen, L., & Venter, E. R. (2017). The economic consequences associated with integrated report quality: Capital market and real effects. Accounting, Organizations and Society, 62(5), 43–64. https://doi.org/10.1016/j.aos.2017.08.005
Barth, M. E., Cahan, S. F., Chen, L., & Venter, E. R. (2022). Integrated report quality: Evidence from South Africa. European Accounting Review, 31(4), 788–814. https://doi.org/10.1080/09638180.2020.1844357
Blackwell, J., & Morrison, T. (2023). Corporate governance, integrated reporting and capital market outcomes: A cross-country analysis. Journal of International Accounting Research, 28(1), 67–89.
Bose, S., Shams, S., Ali, M. J., & Mihret, D. (2021). COVID-19 impact, sustainability performance and firm value: international evidence. Accounting & Finance, 62(1), 597–643.
Botosan, C. A. (2006). Disclosure and the cost of capital: What do we know? Accounting and Business Research, 36(SPEC. ISS), 31–40. https://doi.org/10.1080/00014788.2006.9730042
Chen, X., Harford, J., & Li, K. (2007). Monitoring: Which institutions matter? Journal of Financial Economics, 86(2), 279–305. https://doi.org/10.1016/j.jfineco.2006.09.005
Cosma, S., Schwizer, P., & Soana, M. . (2022). The impact of integrated reporting on capital markets: Evidence from Europe. Meditari Accountancy Research, 30(4), 1021–1045.
De Villiers, C., Hsiao, P. C. K., & Wang, Z. (2023). The evolving research on integrated reporting. Accounting & Finance, 63(1), 683–722. https://doi.org/10.1111/acfi.12918
Estrada, J. (2007). Mean-semivariance behavior: Downside risk and capital asset pricing. International Review of Economics & Finance, 16(2), 169–185.
García-Sánchez, I. M., & Noguera-Gámez, L. (2017). Integrated information and the cost of capital.
International Business Review, 26(5), 959–975. https://doi.org/10.1016/j.ibusrev.2017.03.004
Hashmi, M. A., Istaqlal, U., & Brahmana, R. K. (2024). Corporate governance and cost of equity: the moderating role of ownership concentration levels. South Asian Journal of Business Studies, 13(2), 282–
302. https://doi.org/10.1108/SAJBS-01-2021-0019
Hayes, A, F. (2018). Introduction to mediation, moderation, and conditional process analysis: A regression- based approach (2nd ed.). Guilford Press.
IIRC. (2013). www.theiirc.org,
Ivone, & Jevyyanti. (2023). Determinants of the quality of integrated reporting: An analysis cross-border companies. Determinants of the Quality of Integrated Reporting: An Analysis Cross-Border Companies, 21(1), 1–20. https://journal.ubm.ac.id/index.php/akuntansi-bisnis/article/download/3846/2552
Khamis, R., & Buallay, A. (2024). Board diversity and corporate governance. Journal of Financial Economics, 138(2), 471–490.
https://books.google.com/books?hl=en&lr=&id=EgsZEQAAQBAJ&oi=fnd&pg=PR5&dq=work+stress+
organizational+commitment+work+social+support+turnover+intention+slr+islamic+bank&ots=vL_A3bq MwD&sig=Fh9EjQYsgQCborjsfjZMz8qJBxE
Landau, A., Rochell, J., Klein, C., & Zwergel, B. (2020). Integrated reporting of environmental, social, and governance and financial data: Does the market value integrated reports? Business Strategy and the Environment, 29(4), 1750–1763. https://doi.org/10.1002/bse.2467
Lee, K. W., & Yeo, G. H. H. (2020). Integrated reporting and firm value: Evidence from an emerging market.
Asian Review of Accounting, 28(3), 361–381.
Lee, K. W., & Yeo, G. H. H. (2016). The association between integrated reporting and firm valuation. Review of Quantitative Finance and Accounting, 47(4), 1221–1250. https://doi.org/10.1007/s11156-015-0536-y
Luo, L., & Tang, Q. (2021). Corporate governance and carbon performance: Role of carbon strategy and awareness of climate risk. Accounting & Finance, 61(2), 2891–2934.
Mazzotta, R., Bronzetti, G., & Veltri, S. (2023). Integrated reporting and firm value: The moderating role of institutional context. Journal of Appled Accounting Research, 24(1), 89–110.
Melloni, G., Caglio, A., & Perego, P. (2017). Saying more with less? Disclosure conciseness, completeness and balance in Integrated Reports. Journal of Accounting and Public Policy, 36(3), 220–238. https://doi.org/10.1016/j.jaccpubpol.2017.03.001
Menicucci, E., & Paolucci, G. (2022). Board characteristics and integrated reporting quality: Evidence from European firms. Corporate Social Responsibility and Enviromental Management, 29(5), 1833–1849.
Mohmad, Z., Noor, M., & Shaari, R. (2020). Good governance and sustainability in corporate sector: An evidence from developing markets. International Journal of Industrial Management, 7(1), 1–9.
Pavlopoulos, A., Magnis, C., & Iatridis, G. E. (2019). Integrated reporting: An accounting disclosure tool for high quality financial reporting. Research in International Business and Finance, 49, 13–40. https://doi.org/10.1016/j.ribaf.2019.02.007
Pham, P. K., Suchard, J., & Zein, J. (2012). Corporate Governance and the Cost of Capital: Evidence from Australian Companies. Journal of Applied Corporate Finance, 24(3), 84–93. https://doi.org/10.1111/j.1745-6622.2012.00392.x
Pinto, L., & Raúl, B. (2020). Does ESG performance influence the cost of equity? Evidence from European firms. Corporate Social Responsibility and Enviromental Management, 27(6), 2681–2694.
Raimo, N., Caragnano, A., Zito, M., Vitolla, F., & Mariani, M. (2021). Extending the benefits of ESG disclosure: The effect on the cost of debt financing. Corporate Social Responsibility and Enviromental Management, 28(4), 1412–1421.
Ramirez, A., & Gonzalez, C. (2021). The moderating effect of corporate governance on the relationship between integrated reporting and cost of capital. Corporate Governance: An International Review, 29(5), 445–467.
Robertson, F. A., & Samy, M. (2015). Factors affecting the diffusion of integrated reporting – a UK FTSE 100 perspective. Sustainability Accounting, Management and Policy Journal, 6(2), 190–223. https://doi.org/10.1108/SAMPJ-07-2014-0044
Sharif, H., Naeem, M. A., & Shahzad, F. (2022). Role of Analyst Following in the Relationship between Integrated Reporting Quality (IRQ) Disclosure and Cost of Equity Capital in Developed Markets. Universal Journal of Accounting and Finance, 10(6), 938–952. https://doi.org/10.13189/ujaf.2022.100603
Steyn, M. (2014). Organisational benefits and implementation challenges of mandatory integrated reporting: Perspectives of senior executives at South African listed companies. Sustainability Accounting, Management and Policy Journal, 5(4), 476–503. https://doi.org/10.1108/sampj-11-2013-0052
Takahashi, K., Yamamoto, H., & Chen, L. (2022). Board characteristics, integrated reporting quality and capital market benefits: Evidence from Asian capital markets. Journal of Asian Business Studies, 16(3), 412–435.
Velte, P. (2022). Archival research on integrated reporting: a systematic review of main drivers and the impact of integrated reporting on firm value. Journal of Management and Governance, 26(3), 997–1061. https://doi.org/10.1007/s10997-021-09582-w
Vitolla, F., Salvi, A., Raimo, N., Petruzzella, F., & Rubino, M. (2020). The impact on the cost of equity capital in the effects of integrated reporting quality. Business Strategy and the Environment, 29(2), 519–529.
Zhou, S., Simnett, R., & Green, W. (2017). Does Integrated Reporting Matter to the Capital Market? Abacus, 53(1), 94–132. https://doi.org/10.1111/abac.12104
Published
2026-05-18
How to Cite
Sia, J. and Weli, W. (2026) “The Contingent Impact of Integrated Reporting on Cost of Equity: Evidence from Good Corporate Governance Moderators in Indonesia”, Dinamika Akuntansi Keuangan dan Perbankan, 15(1), pp. 51-63. doi: 10.35315/dakp.v15i1.10580.
Section
Articles
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