The impact of risk management committee on integrated reporting disclosure in Indonesia

Abstract

Corporate reporting has evolved from financial reports, annual reports, sustainability reports, and integrated reports. Previous studies have examined the determinant of integrated reporting (IR) which includes leverage, profitability, size, external board member ratio, and female board member ratio, but none of these studies have examined the impact of a risk management committee on IR. This study aimed to; (1) analyze the level of implementation of the IR element according to the International Integrated Reporting Council (The IIRC) framework in the annual reports of firms listed on the Indonesia Stock Exchange (IDX); and (2) analyze the effect of a risk management committee, size, profitability, and leverage on the implementation of IR elements in the annual reports of companies in Indonesia. The data obtained from the content analysis were then analyzed further using multiple regression analysis. The results show that firms in Indonesia scored an average of 40.33 percent (30 out of a maximum score of 74) for disclosing information in their annual reports according to the IIRC framework. The results also show that a risk management committee, firm size, and profitability positively affect the level of adoption of IR disclosure in the firms’ annual reports, while leverage negatively affect IR adoption. This study provides initial empirical evidence that risk management committees have a role in the emerging IR practices. This study is novel because it shows that risk management committees affect companies’ IR practices. This research implies the existence of a risk management committee is needed to implement IR in Indonesia.