Policy-driven integrated reporting and integrated thinking: A cross-country analysis

Drawing upon the institutional approach of legitimacy theory and Hofstede's cultural model, this study (a) examines the improvement of integrated thinking (IT) after applying integrated reporting (IR) policies, (b) compares the policy effects in policy-driven adoption and voluntary adoption and (c) explores the cross-country differences from the perspective of culture and policy convergence. We collect data from countries with corporate governance codes encouraging IR (i.e., Australia, Japan and Malaysia). We first use a difference-in-differences (DID) design to compare policy-driven adoption with voluntary adoption in each country. Then, we use the treatment-effect model to examine the influence of culture and policy convergence. The DID results indicate an increase in IT after applying IR policies, but the effect of IR policies on promoting IT is limited in policy-driven adoption. The treatment effect model results show that power distance and uncertainty avoidance will promote IR adoption, and long-term orientation and detailed guidance can mitigate the worse performance in policy-driven adoption. Our suggestions may help countries adjust their IR policy to improve policy effectiveness based on different cultural settings. Furthermore, our study provides quantitative evidence of the relationship between policy-driven IR and IT and innovative insights into the cross-country analysis for further IR research.