The impact of national cultural differences within the board on Integrated Reporting

This research, based on stakeholder theory and the national cultural dimensions, aims to test the influence of foreigners on board and its size on Integrated Reporting (IR) practices. The production and presentation, currently voluntary, of an IR extends the information contained in traditional financial statements. Its use may be justified by reference to stakeholder theory, according to which organisations should create wealth for all participants (or stakeholders), in contrast to the traditional financial model based on creating value for the principal agent or shareholder. On the other hand, from the board composition perspective, the stakeholder theory suggests that diversity can be perceived as a crucial indicator of a firm’s Corporate Social Responsibility (CSR) and as a sign of a stakeholder-oriented firm. International board composition (national diversity) is a diversity variable. The national culture, as internal factors of board corporations, is an institutional element that influences board choices preferences regarding financial reporting. Following Hofstede (1980, 1983, 2001), the research focuses on the masculinity/femininity cultural dimension, because of its relevance in previous researches on corporation level disclosure. The national diversity on board has one of the greatest effects on the dissemination of IR, creating a sense making process on corporate disclosure decision-making. A great number such as 1,083 European, from 18 different countries, who adopted or not the IR for the year 2015 were identified, assuming that there is a correlation between the features of the board (percentage of foreigners and size) and the adoption of IR. The research relies on a logistic regression model (Logit). The dependent variable is a dummy (equal to 1 if the company has developed the IR, 0 if the company is not presenting it) and the independent variables are represented by the board characteristics (size and foreigners). The impact of the critical mass on the presence of foreigners and the cultural dimension on the basis of directors’ nationality was tested relying on the masculine and feminine dimension of Hofstede. Besides, the directors’ country of origin was considered, namely if they belong to the major European countries presenting a wider IR diffusion. The relationship between foreigners on board and IR is found to be negative. This means that companies with at least one foreigner are less inclined to adopt IR. The results show that the boards with more of three foreign administrators have a major propensity to adopt the IR. The membership of the directors in countries with a feminist culture also has a positive effect. If the directors come from countries where this practice is more widespread, the propensity is higher.