Mediating impact of integrated reporting on audit quality and market reactions in Africa: evidence from South Africa

Purpose - The purpose of this study is to investigate the mediating impact of integrated reporting on the relationship between audit quality and market reactions in Africa using South Africa as a sample. Design/methodology/approach - The study sample size consists of 119 firms listed on the Johannesburg Stock Exchange. The study was carried out for the period 2011–2019. Market reactions were proxy by share price and adjusted market returns. The authors controlled for the effects of market reactions by using other firm specifics like operating income, assets, leverage and return on assets and thereafter carried out robustness checks included under additional analysis. Findings - Results from the study showed that integrated reporting partially mediates the relationship between audit quality and market reactions. Moreover, audit quality has a positive significant impact on market reactions in the form of the share price. The results were obtained in addition to a robustness check using adjusted market returns as a proxy for market reactions. Practical implications - Regulators and standard setters in other countries should make integrated reporting mandatory. This study not only informs the public and investors about the organization’s business performance but also reveals auditor assurances that enchase market confidence in the company. Social implications - Exploring the mediating impact of integrated reporting on the relationship between audit quality and market reactions yields valuable insights. Integrated reporting, which combines financial and non-financial information, influences how investors perceive and react to audit quality. Understanding this interplay could shed light on the broader implications for corporate transparency and accountability. Originality/value - The authors are the first to conduct such a study in an emerging economy. Hence, the authors used integrated reporting as a new variable in the study of audit quality and market reactions. Furthermore, the authors used adjusted market returns under robustness checks to check if audit quality has an impact on market reactions.