We examine whether the practice of integrated reporting (IR) can reduce agency problems between managers and investors, resulting in lower agency costs. We construct a sample of firms that voluntarily use IR in practice, drawn from 35 countries, and find that firms that apply IR practice more extensively (high IR firms) are associated with lower levels of agency costs and more negative year-to-year changes in agency costs compared to other IR firms (low IR firms). We also find that the relation between the level of IR practice and agency costs is more negative in countries with a stakeholder orientation than in countries with a shareholder orientation. Additionally, the effectiveness of IR is more pronounced in diversified firms that face greater agency problems. Our results are robust in a series of additional tests that address endogeneity. Overall, our evidence is consistent with IR having a disciplining role for managers.

Purpose: The purpose of this paper is to examine the relationship between accounting conservatism, corporate governance and political connection in listed firms in Malaysia where political influence plays a significant role in the capital market and in many business dealings.Design/methodology/approach: By utilizing 824 firm-year observations comprising large listed companies over a period of four years from 2004, this study uses ordinary least squares regression models to investigate the relationship between accounting conservatism, corporate governance and political connections in Malaysia. Multiple measures of conservatism developed by Basu (1997) and Khan and Watts (2009) are employed.Findings: The results show evidence of accounting conservatism (bad news being recognized earlier than good news) in Malaysia. Further, the results reveal that better corporate governance structure in terms of board independence is positively associated with accounting conservatism while management ownership is negatively associated with it. However, political connection has a negative moderating effect on the positive relationship between accounting conservatism and board independence. The results also suggest political connections have a positive association with firm’s future performance.Originality/value: This study is the first in investigating the effect of political connections on accounting conservatism in Malaysian context and how political connections negatively affect the monitoring role of the corporate boards. By directly measuring political connection and controlling for various corporate governance mechanisms and firm-specific attributes, this study contributes to enhance the authors’ understanding of the political influence in financial reporting quality and firm performance in an emerging market setting.