Association between the emotional content of integrated reporting and companies' economic performance

Abstract

The objective of the study is to examine the association between the emotional content of integrated reporting and the economic performance of listed Brazilian companies. Related literature indicates a demand for studies on integrated reporting in emerging countries, notably those that assess the tone of corporate communication, involving positive and negative emotions, and its relationship with the economic performance of companies. The study is relevant due to its originality in discussing the voluntary disclosure of financial and non-financial information from the perspective of emotional content, associating positive and negative emotions with the economic performance of companies, measured by different metrics. The study has impacts such as: i) alerting investors and creditors to qualitative information and the tone of corporate narratives; ii) contributing to the decisions of investors and creditors by addressing subjective and interpretive aspects (positive or negative tone in integrated reports); iii) signaling to integrated reporting developers and regulators that the intensity of positive or negative emotion is associated with the economic performance of firms. The sample involves 160 company-year observations from 2014 to 2022. The Dictionary of Emotion Terms in Accounting and Finance was used to assess emotional content. The data were analyzed using descriptive statistics and multivariate regression models. The results of the study indicate a significant association between the emotional content of integrated reporting and the economic performance of companies. Positive emotion was negatively associated with the cost of capital, while negative emotion was inversely associated with profitability and market value.