The role of firm complexity in the relationship between integrated reporting and earnings management

Purpose This study aims to evaluate the relationship between integrated reporting and management’s opportunistic behavior (i.e., accrual and real earnings management) and the moderating role of firm complexity. Design/methodology/approach Data of firms at the Johannesburg Stock Exchange were collected and analyzed. The Johannesburg Stock Exchange is currently the primary exchange that mandates the practice of integrated reporting. Regression estimation models and robustness tests were applied to the analysis. Findings This study concludes that integrated reporting quality reduces firms’ accrual and real earnings management practices. It further concludes that the significant negative effect of integrated reporting quality on firms’ earnings management practices is impeded by higher firm complexity. Originality/value This study enhances the literature on the behavioral effect of a combined financial and sustainability disclosure practice on both accrual and real earnings management, specifically targeting South Africa’s listed companies – the primary market currently mandates integrated reporting practice.