Methodology for Quantifying Corporate Value Statements in Japanese Integrated Reports and Stock Return Analysis

Abstract

IIRC Framework, which provides guidelines for integrated reports, states that the purpose of an integrated report is to explain the process by which corporate value is formed in the long term. Based on this framework, the purpose of this study is to reveal the relationship between integrated reports prepared in accordance with the IIRC framework and stock prices. This study focuses on integrated reports issued by Japanese companies. First, betweenness and degree centralities are used to score the integrated reports prepared according to the IIRC framework. Next, portfolios are created by quantile according to the score, and regression analysis is performed using Fama-French three factor model. As a result, a positive abnormal return is observed in the portfolio with the highest score stocks. It indicates the potential for this score to be used in stock selection.