Impact of Integrated Reporting on Information Asymmetry: Evidence from Sri Lanka
Samitha Rajapaksha 
Sampath Kehelwalatenna
Abstract
Considering the dearth of empirical evidence on the impact of integrated reporting (IR) on information asymmetry in developing countries, this paper investigates the impact of IR on information asymmetry in Sri Lanka. A paired sample t-test and a panel regression analysis are employed to draw empirical evidence. Information asymmetry is proxied by earnings forecast error, earnings forecast dispersion, and cost of equity capital, whereas firms’ IR level is measured using the IR framework. Findings indicate a significant reduction in information asymmetry upon adopting IR. Further, they reveal that the level of IR has a feeble but statistically significant negative impact on the cost of equity capital. Earnings forecast error and forecast dispersion do not indicate significant associations with IR levels. Given the substantial cross-country differences, this paper offers a better understanding of the impact of IR on information asymmetry from a developing country setting where the adoption of IR is voluntary.
Keywords: Adherence Level of Integrated Reports, Information Asymmetry, Integrated Reporting, Sri Lanka
Volume 13, Issue 2
December 31, 2022
Pages: 76-108
DOI: http://doi.org/10.4038/cbj.v13i2.125
Suggested citation:
Rajapaksha, S. & Kehelwalatenna, S. (2022). Impact of integrated reporting on information asymmetry: Evidence from Sri Lanka. Colombo Business Journal, 13(2), 76–108. http://doi.org/10.4038/cbj.v13i2.125
Samitha Rajapaksha
Department of Accounting, University of Colombo, Sri Lanka
Sampath Kehelwalatenna
Department of Accounting, University of Colombo, Sri Lanka
