Beyond Compliance: Governance and Integrated Reporting as Strategic Systems for Corporate Sustainability

Abstract

Information asymmetry between firms and stakeholders remains a persistent challenge because conventional reporting systems often fail to capture the broader dimensions of value creation, while existing studies largely treat corporate governance as a one‐directional determinant of integrated reporting and overlook potential feedback mechanisms. This study addresses this limitation by examining whether corporate governance and integrated reporting operate as complementary mechanisms or as components of a dynamic causal system. Using a sample of 100 NSE‐listed firms in India over the period 2013–2025, the study investigates the simultaneous relationship between Integrated Reporting Alignment Score (IRAS) and key governance dimensions, including board size, board independence, women on board, board meeting frequency, audit committee size, and firm age. IRAS is constructed using content analysis based on the International Integrated Reporting Council framework. Methodologically, the study employs a panel vector auto‐regression (PVAR) model estimated through the generalized method of moments (GMM), enabling all variables to be treated as endogenous and allowing dynamic feedback effects and shock transmission to be captured. The findings reveal significant bidirectional relationships between governance mechanisms and integrated reporting. Board independence and board meetings significantly influence reporting quality, while integrated reporting also generates feedback effects on governance structures. Granger causality results confirm strong dynamic interdependencies, while variance decomposition analysis highlights moderate cross‐variable interactions and substantial own shock persistence. Cointegration findings further indicate a stable long‐run relationship among governance and reporting dimensions. The results suggest that corporate governance and integrated reporting evolve jointly as mutually reinforcing elements within an integrated organizational system.