Research Article: 2021 Vol: 13 Issue: 3S
Ali Khalaf Gatea Al-Jubouri, Southern Technical University
Haider Ali Jarad Al Masoudi, Southern Technical University
Citation: Gatea, A.K., Jarad, H.A. (2021). The effect culture dimensions on quality of integrated reporting. Business Studies Journal, 13(S3), 1-16.
Culture Dimensions, Quality, Integrated Reporting.
The dramatic development of economic conditions highlights actual and potential shortcomings in the historical information of economic units. Because it cannot meet the diverse needs of investors for information consistent with the needs of economic development. Inability to provide stakeholders with adequate visibility. With regard to critical success factors, opportunities, risks and management plans as a more integrated perspective, this changing business environment and increasing complexity. As a result of the increasing need for non-financial information for economic units in light of the inability of their financial reports to provide information relevant to decision-making by stakeholders, which may relate to social or environmental relations as well as the cultural and cognitive diversity of the individuals working in them. He called for the emergence of a new type of integrated reporting, which is called integrated reporting (IR) to be an alternative to traditional financial reporting limited to financial activities or those that the economic unit is obliged to report. Because of its nature that could lead to the formation of a contingent liability in the future. Integrated reporting (IR) has gained significant attention in recent years as an emerging approach to integrated reporting on the activities of financial and non-financial economic units.
The values of the cultural dimensions
Since the fifties of the last century, cultural dimensions have played an important role in the humanities and social sciences, and many theories have emerged, which emphasize the need to study national culture, and its impact on society from a social and economic point of view, in light of the rapid development and its technological effects, as well as competitiveness on world leadership after The Second World War.
(Fink et al. al, 2006) Kluckhohn, 1951 perhaps the study was one of the first studies that dealt with cultural dimensions from a quantitative scientific research perspective, as it set a standard for all additional research on developing and measuring the dimensions of cultural values. It assumed five problem areas in societies and reformulated them as follows:
(Hall & Hall, 1990) While the anthropologist presented (Hall) four valuable dimensions to help managers understand the behavior of workers, based on his experience, which he conducted in 180 open interviews with people working in the field of business, and the results were as follows as follows:
As for the study (Hofstede, 1980), which began (1968-1972), it included the following dimensions (Hofstede, 2011):
The Impact of Cultural Dimensions in Decision Making
(Vitell, 1993) Several studies have emerged that have been concerned with studying the impact of cultural dimensions, perhaps the most prominent of which is the study (Barrels, 1967), which dealt with social and ethical responsibility in business and the role of cultural dimensions; In making decisions and taking into account the legal aspects, personality, national identity, and property rights, based on (moral theory) that focuses on specific actions or behaviors of the individual, or (purpose theory) which is concerned with the consequences of those actions or behaviors
(Podrug, 2006) In general, business communities cannot distance themselves from the effects of cultural dimensions, as they aim to protect their interests, and as an inevitable result of the globalization of the economy, the importance of cultural influence on management and its behavior within the economic unit has increased, as it is a reflection of its environment in which it deals, and its techniques applied in decision-making as follows:
(Rogerson et al, 2011) However, decision-making can be complex when decisions include complex and conflicting situations, vague or non-existent guidelines, and as a result, decision-making is based on a number of influencing factors and available options, which can lead to many pathways that can Controlling it by dividing the decision-making process and studying the impact of the cultural and ethical dimension, given that management is nothing but an agent for others in the decision-making process, which aims to preserve capital and achieve the wishes of its clients, which was confirmed by the normative theory when making a decision.
(Ford and Kotzé, 2005) indicate that culture affects the way in which the business environment interacts, as well as the way in which society communicates with the system and the user, and accordingly, people learn patterns of thinking, behaving and communicating by living in a social environment defined by cultural patterns, which usually What distinguishes it from national culture, and accordingly, culture predetermines the preferences and behaviors of communication between cultural patterns and values, through a number of environmental influences, foremost of which is technological development, which has contributed to changing the pattern of doing business and the interaction between society and institutions.
(Ho et al, 2012) believes that the cultural impact on the performance of economic units has become a reality in the past few decades, due to the realization that business organizations are not only an economic entity with a legal personality, but also have social responsibilities towards various stakeholders and the surrounding environment, as well as The existence of new variables and connections, due to the globalization of the economy and the expansion of trade, stakeholders began to assert or expect more social responsibilities from economic units, including the surrounding cultural environment and their social and environmental obligations.
Also (Abdullahi & Zainol, 2016) believes that the socially built reality when workers create a social framework, turns into an effective reality that forms a behavioral pattern that affects the business environment, and as a result, all intangible things, which directly or indirectly affect decision-making, are called It (the social and cultural business environment), which refers to a set of common core values that contribute to shaping the behavior of individuals working in the business environment. The researcher believes that there are rarely homogeneous societies with a unified culture, which has been proven in many studies, that cultures affect societal behaviors, and as a result society’s interaction with the business environment, and the resulting economic consequences related to satisfaction or non-acceptance, which was indicated It is concerned with how to make a decision depending on the level of participation, and the evaluation of available alternatives, so the reaction is related to how to respond to the emerging variables, whether related to adaptation or mitigating the risks associated with decision-making, and cultural dimensions can be viewed as an integral part of the prevailing patterns of production and consumption. life and social organization.
As a result, we must understand how people's mindset, perception or behavior affect the success or failure of the business environment in achieving its goals, and how it can help the economic unit to manage its resources, more effectively, and reduce potential undesirable cultural biases that can affect The decision-making path, as the organizational culture of the administration, can affect the level of performance improvement and the effectiveness of communication at the organizational and personal level with the workers in the economic unit or the beneficiaries of its outputs, whether services or data intended to be used for decision-making.
The Concept of Information Quality in Integrated Reporting
(Cortesi & Vena, 2019) defines it as the increased demand for information provided by economic units in their reports, whether voluntary or mandatory. It has led to an increase in the amount of information it discloses clearly over the past decades. This prompted the issuance of various reports such as financial reports, corporate governance, and social responsibility, to meet the growing need for beneficiaries. While (Miron et al, 2004) sees that the presence of fragmented and confusing reports, and raising dissatisfaction with the economic unit reports models, led to gaps in the nature of information that may hinder decision-making, which can be avoided by issuing consolidated and consolidated reports that enhance the transparency and quality of information, As a result, the focus on quality has increased. With the beginning of the emergence of quality measurement standards (ISO) and the adoption of the main requirements for them, and obligating organizations to develop and implement a set of procedures, to ensure that the beneficiary obtains the maximum quality from the economic unit. Or as (Elshaer, 2012) defines it as the situation in which a set of inherent characteristics meets the ever-changing requirements of beneficiaries and other stakeholders, and in general quality can be defined as an essential tool for comparing specifications. (Diaz, 2014) refers to the set of characteristics inherent in an element, and also allows meeting the stated or implicit needs of the beneficiaries, and as a result, the quality is the beneficiary's perception of it, or it is a mentality that accepts the specifications and its ability to meet his needs. (Cooray et al, 2020)Over the past few decades, stakeholders' demand for environmental, social, financial and administrative information has increased significantly, which has encouraged the creation of a new form of reporting in light of the emergence of international relations, as a new dimension to the reports issued by economic units, in an attempt to make them more effective to improve The efficiency of administrative and investment decision-making, with regard to improving the quality of information available to capital providers, which is achieved by integrated reports, in sharing environmental, social, financial, non-financial and governance information in one report, based on concepts and principles aimed at providing a more efficient and coherent reporting system.
(Songini et al, 2021) As a result, the board of directors plays a very important role, as it represents the role of the defender of its higher interests in achieving the quality of disclosure, and in line with the representation of the interests of other beneficiaries, within an integrated thinking environment, as a determining factor for the voluntary disclosure mechanisms of the economic unit, which may affect the quality of the information provided. Since the board of directors is the main decision-maker, responsible for managing and protecting the available resources, and making the most possible use of the wishes of the various stakeholders (John1988, Pavlopoulos et al 2019) Since integrated reports are the latest form of reporting reports that depend on the information provided by the administration, this makes it difficult to verify them as a result of several factors that can be summarized as follows:
Accordingly, the quality of the information provided by the integrated reports, which makes them more important, comes from its impact on creating future value, which was not previously considered in the preparation of financial reports.
Integrated Reporting Quality
(IIRC, 2013) indicates that Integrated Report Quality conceptually refers to the degree of compliance of integrated reports and their submission to the practice of governance, from those responsible for preparing integrated reports, as well as the environment for the organization to determine the material matters, and how to disclose them in the integrated reports. As a result, the management of the unit The Economist has discretion in what it chooses to disclose, which will lead to different levels of alignment between the integrated reporting and the conceptual framework (Moloi, 2020), which seeks to produce integrated, high-quality, long-term reports as part of the prevailing business practices in the public and private sectors, with the aim of improving the quality of available information. Disclosure of financial and non-financial information is of value to stakeholders and capital providers in particular, and to provide them with both forms of information in one comprehensive report, to create and enhance long-term value, and to disclose financial and non-financial information in a complementary way, enabling them to evaluate the available opportunities in a way More effective, more intensive control of capital investment, and this is the goal that integrated reports strive to achieve. The conceptual framework of integrated reports (IIRC) is also integrated with the general framework for management ethics issued by the Institute of Management Accountants (IMA), regarding the need to achieve a high level of quality of the information disclosed, and that the administration adhere to a number of standards that lead to enhancing efficiency and confidentiality , integrity, and credibility, which includes the following (IMA, 2017):
Factors Affecting The Quality Of Integrated Reports
(Owen, 2013, Guthrie et al 2020, Vitolla et al, 2019) There is a historical fact that proves that the preparation of reports evolves directly with the changing information needs of decision makers, and to realize the shortcomings in meeting the needs for data and information, economic units adapt themselves to modernize their reporting system, as well as the effects of the surrounding environment have a role in determining how to disclose Information, country-specific factors, influence reporting preferences using the perspective of institutional theory, which states that organizations are embedded in a comprehensive system of political, financial, educational, cultural, and economic institutions that pressure departments to disclose information. The adequacy of reports in meeting the information needs of beneficiaries is questionable to disclose risks, reduce uncertainty, improve regulatory transparency, and stakeholders’ decision-making processes, and financial reports overlook types of risks that pose a threat to organizational sustainability and society. As a result, integrated reports have emerged, as a more comprehensive and updated reporting system, aimed at meeting the needs of all stakeholders, instead of preparing stand-alone reports with a targeted goal, such as sustainability reports, financial reports, and other reports produced by management to disclose specific information with a context focused on A specific goal, which means that economic units adopt integrated reports, not just to reform the quality of disclosure in them. In order to understand the current reporting process, the factors affecting the quality of integrated reports must be studied, which include the following (Jensen, J. C., & Berg, 2012):
The methodology represents a map for arranging the researcher’s ideas to present the research problem, its importance and the goals that the researcher seeks to achieve, based on scientifically formulated research or mental hypotheses, and linking them with the diagnosed problems to know the level of availability of solutions and theoretical accessibility by analyzing data or opinions that can be collected from the research sample and as a result The proposed research methodology. The process of reporting the results of the business of the economic unit is tainted by various problems that prompted the emergence of an advanced type of reports, which aims to achieve a higher level of quality of accounting reporting, and on the other hand shows a set of dimensions that affect the behavioral aspects, to know the effects associated with the work of economic units, whether they are Those influences are social, environmental, or internal, related to how management deals with them and make decisions, which appeared in the form of integrated reporting, and the impact of cultural dimensions on the quality of integrated reports. And research importance from Quality problems in reporting business results are one of the matters of importance to the beneficiaries of financial reports, and as a result of the expansion of business and the economic and financial overlap of various economic activities and sectors, financial information has become insufficient to take effective decisions with a future dimension, as a result of which the need for more detailed reports has emerged. It is presented to stakeholders to know the effects associated with the work of economic units, whether those effects are social, environmental or internal, related to how the administration deals with it and take internal decisions, which appeared in the form of integrated reporting and the extent of the impact of cultural dimensions on the quality of integrated reporting.
The research seeks to identify the cultural dimensions and their impact on the quality of integrated reports, and shed light on the role of cultural dimensions in the decisions of the Board of Directors and the selection of disclosure mechanisms in the integrated reports.
The research is based on a main hypothesis that states "there is a significant statistically significant relationship at the level (0.005) between the cultural dimensions of (Hofstede) and the quality of reporting in the integrated reports."
1. Data collection and analysis
For the purpose of measuring the impact of cultural dimensions on the quality of integrated reports from the point of view of management, stakeholders and other beneficiaries, a questionnaire was designed that includes the main cultural dimensions mentioned by (Hofstede 2010) as follows:
The questionnaire included (6) main axes, each of which contains (10) paragraphs, which can affect the behavior of the preparers of integrated reports, and the quality of the information contained therein. Simplicity and clarity were taken into account in its formulation as a tool for collecting the necessary data and information.
For the purpose of measuring the stability of the internal consistency between the paragraphs of the axis, the stability index (Cronbach's Alpha) was used, which is a measure coefficient of the reliability of the test and the most common and appropriate for scales with graduated weights, as follows in Table 1.
|Cronbach's Alpha||Cronbach's Alpha Based on Standardized Items||N of Items|
And whose validity can be enhanced by conducting a parametric test (Pearson Correlation coefficient), to measure the value of the change in the dependent variable, the quality of integrated reports, which is symbolized by the symbol (Y) as a result of the change in the value of the independent variable, which is the cultural dimensions of (Hofstede ), which is symbolized by the symbol (X), which is shown in Table 2.
Inter-Item Correlation Matrix
In addition to the above, the business environment in which administrative and investment decisions are made, has an impact on the nature of the behaviors and trends that the decision maker can adopt, and for the purpose of knowing the impact of the subjective characteristics of the research sample and ensuring the link between them and the trends of cultural dimensions, within the axes of the questionnaire, which came as In Table 3 as follows.
|Model||Sum of Squares||df||Mean Square||F||Sig.|
|a. Dependent Variable: الابعاد الثقافية|
|a. Dependent Variable: culture dimension
b. Predictors: (Constant): gender, work experience, type of work, workplace, educational attainment
The quality of integrated reports depends on the quality of the information contained in the financial and non-financial statements (management report), depending on the relationships provided by those reports between its paragraphs, which can provide an advanced vision in integrated reporting, and reflect how the economic unit creates current and future value. For the purpose of measuring the quality of integrated reports, many previous studies and research have been reviewed, for the purpose of forming a more realistic picture that can be applied in the Iraqi environment, based on what is disclosed in its annual reports. et al, 2018, which focused on four main elements of the content of the integrated reports, which included the background that the economic unit enjoys in presenting its reports, the extent to which the credibility of the disclosed data is ensured, and the absence of conflict of interest with the beneficiaries by enhancing the reliability of integrated reporting, clarity of content and Data presentation independence.
As for the study (Raimo et al, 2019), it focused on the extent to which economic units comply with the conceptual framework issued by the International Integrated Reporting Council (IRCC), which included the strategy of the economic unit, resource allocation, governance, the relationship with the external environment, future risks and opportunities, and their relationship The cultural dimensions, which depended on measuring their values within the national cultural environment of the research sample.
While the study (Moli, 2020) relied on the classification of the (Ernst & Young) institution in measuring the quality of integrated reports, based on a comparison between the degree of disclosure and its relationship with the governance of the economic unit, which focuses on the distribution of powers between decision-making centers.
As a result, the model for measuring the quality of the integrated reports presented by the study, to measure the quality of the integrated reports, issued by the research sample units and which the researcher assumes within the research sample, according to the following:
IR QUALITY = ß0 +ß1 PER + ß2 SIZE + ß3 ROE + ß4 SHARE P. + ß5 PD + ß6 UA + ß7 IVC + ß8 MVF + ß9 LTO + ß10 IVR + ß11 SEN + Ɛ. ( 1 )
It represents the following elements:
Table 4 shows the measurement of the quality of integrated reports according to equation (1) for the research sample, which consisted of 20 companies listed on the Iraq Stock Exchange.
|Valid N (Listwise)||20|
For the purpose of linking the variables of equation (1), and knowing the relationship of the dependent variable (Y), which represents the quality of integrated reports, to the independent variable (X), which represents the variables assumed in equation (1) and their impact on the quality of integrated reports, which can be clarified in Table 5 as follows:
Correlations , T Test
|**. Correlation is significant at the 0.01 level (2-tailed).|
|Test Value = 0|
|t||df||Sig. (2-tailed)||Mean Difference||95% Confidence Interval of the Difference|
As for the degree of influence of the independent variables in equation (1) on the dependent variable, which represents the quality of the integrated reporting, it can be measured by the linear regression equation, which states:
Where (a) Constant represents the amount of the constant and this relationship means that the quality of the integrated reporting (Y) is a function of the true value of the effect of the independent variables (X) in equation (1) shown in the following Table 6.
|Model||Sum of Squares||df||Mean Square||F||Sig.|
a. Dependent Variable: X
b. Predictors: (Constant), y
The change in the business environment and its economic complexities, created a kind of deficiency in financial reports in meeting the needs of the renewed information needs of stakeholders, and the inability to keep pace with developments, due to its focus on financial information only that pertains to operational and investment activities.
As a result, the integrated reporting process is the result of the development of the need for integrated information, which aims to unify the reports issued by economic units of all kinds, financial and non-financial, and sustainability reports in a unified manner, facilitating the process of reading them from the main stakeholders and other beneficiaries, and which requires the departments, to adhere to the conceptual framework of integrated reports. (IR), in addition to the International Accounting Standards (IAS) and Financial Reporting Standards (IFRS), and the extent to which they apply the concept of integrated strategic thinking.
Since the economic unit is part of a social environment, representing its business environment, it affects and is affected by the values of that society or what is known as cultural dimensions, which can be of a sensitive nature, in integrated reporting practices and as a result its reflection on the value of the economic unit, as the results show that the dimensions Cultural plays an important role, in the integrated reporting of economic units, because of the nature of the formation of the social personality of those responsible for their numbers, in addition to the above, the business environment, in which administrative and investment decisions are made, has an impact on the nature of the behaviors and directions that the decision maker can adopt.
Culture is a factor affecting human behavior in particular and society in general, and its values in general, and cannot be neglected or dispensed with, in the formation of personal or social and economic practices, and as a result, its impact on accounting practices cannot be neglected as it is part of society, it affects and is affected by cultural behaviors that reflect Personal characteristics of stakeholders. Societies are usually classified according to cultural concepts that reflect the level of awareness, development, and adherence to societal customs and values.
Understanding how the human mindset or behavior affects the success or failure of the business environment in achieving its goals is important to help the economic unit manage its resources more effectively, and reduce potential undesirable cultural biases, which can affect the course of decision-making, as The organizational culture of the administration can affect the level of performance improvement and the effectiveness of communication at the organizational and personal level with the workers in the economic unit or the beneficiaries of its outputs, whether services or data intended to be used for decision-making.
The significance of the integrated reporting quality enables the stakeholders and beneficiaries of the reports published by the economic unit to know the accuracy of the economic unit’s disclosure of its financial and non-financial activities, and that the difference in the quality of the integrated reports of the economic units, the research sample, and their variation in some cases is due to the different methods of preparing financial and non-financial reports. financial as well as fluctuations in economic activity within the business environment.
There is no doubt that the adoption of integrated reports is an advanced stage in reporting the financial and non-financial activities of the economic unit, but it is only a station in the process of continuous development, as the International Integrated Reporting Council (IIRC) and the Sustainability Accounting Standards Board (SASB), officially announced their merger to form a reporting institution. The Value Reporting Foundation, to support business and investor decision-making with three key resources, including Integrated Thinking Principles, Integrated Reporting Framework, and Sustainability Accounting Standards, to help business units and stakeholders develop a shared understanding of business unit value, and how it is created, maintained, or eroded. Over time, VRF is also committed to providing a more coherent reporting system by working with the International Financial Reporting Standards Board (ISAB).