The Effect of Integrated Reporting on Earnings Quality with Emphasis on Agency Costs

The purpose of this paper is to review the effect of integrated reporting on earnings quality with emphasis on agency costs in the companies listed at Tehtan Stock Exchange.

This research is applied in terms of purpose and the information of 149 companies during 2013 to 2021 has been used. To analyze the findings, Structural Equation and partial least square were used, which provide the possibility of examining direct and indirect relationships between variables.

The results showed that integrated reporting has a positive and significant effect on earnings quality. Also, agency costs have a positive and significant effect on the relationships between earnings quality and on integrated reporting.

The International Framework for Integrated Reporting sets the dual goals of improving information for external supplires of capital and better internal decision making for integrated reporting. If disclosure mechanisms are more transparent, information will be provided with better quality. Integrated reporting as a disclosure mechanism has a positiv effect on accounting information and especially the quality of reported earnings. If the earnings quality is high, it is expected that managers will show more willingness to disclose additional information. Based on this, agency costs are also reduced.

Contribution: 

Integrated Reporting through the provision of clear and comprehensive information allows internal decision makers to make optimal decisions that improve the company’s performance. The results of this paper consider it necessary to pay attention to the role of integrated reporting. Also, examining different earnings quality criteria and considering agency costs as moderating variables and measuring variables using multiple criteria and evaluating their validity based on structural equation modeling is considered as research innovation.