The progression of disclosures in the basic materials industry of South Africa

Abstract

Considering debates surrounding the usefulness of integrated reporting for decision-making, this exploratory study uses objective measures to investigate the quality of disclosures other than financial in the basic materials industry of South Africa. Annual and integrated reports for the basic materials and consumer discretionary industries are evaluated over 12 years, from 2008 to 2020 for a total of 1204 firm-year observations to investigate whether (1) integrated reporting brought positive change and (2) whether reporting improved over time. Readability and narrative tone analyses are conducted, and non-parametric Kruskal-Wallis tests are used to investigate the development of these measures over time. The results show that corporate reports in the basic materials industry decreased in quality over time in that the reports have become longer, less readable, and use specific narrative tones, which can create biases. The findings reveal that the declining quality of reports in the basic materials industry could mislead or deter investors, challenge regulatory oversight, and ultimately, impact firms' social licence to operate. Thus, they offer actionable insights for firms to improve disclosure by reducing complexity and length and adopting a neutral narrative tone to mitigate biases, thereby making these reports more accessible and useful for a wider stakeholder audience. In addition, investors ought to demand better reporting, and regulators should tighten guidelines.