Can the innovation in sustainability disclosures reflect organisational sustainable development? An integrated reporting perspective from China

Abstract

AbstractIntegrated reporting (IR) represents the newest development of organisational reporting approach. Although IR approach is gaining momentum globally, its relevance in decision‐making for stakeholders is experiencing ongoing debate. Studies on the relationship between IR practices and organisations' sustainable development are scarce. Using a sample of Chinese listed firms between 2006 and 2019, this article examines the association between IR practices (the integration level of sustainability disclosures) and firms' sustainability performance excellence. We provide strong empirical evidence showing that higher IR practices can offer a positive signal about firms' excellent sustainability performance. Firms tend to signal their excellent sustainability performance in the aspects of social service, environment protection and product quality by increasing their IR practices, which is consistent with the argumentation of signalling theory. Our findings are robust to a number of sensitivity analyses. The empirical evidence of this study enhances stakeholders' confidence in IR as an approach to disclosing a company's sustainability information.