Impact of Integrated Reporting on Risk Management Practices of SMEs in the Perspective of CSE Listed Companies

This study examines the impact of Integrated Reporting (IR) on the Risk Management Practices (RMP) of Small and Medium Enterprises (SMEs) listed on the Colombo Stock Exchange (CSE) from 2015 to 2024. It addresses a literature gap concerning IR's role in SMEs within emerging economies. Employing a quantitative panel data analysis of 40 firm-year observations, the research measures RMP across three COSO-aligned dimensions (Risk Assessment, Risk Response and Monitoring, and Assurance and Disclosures) and assesses IR quality using a score based on the International Integrated Reporting Framework (IIRF). A fixed-effects regression model reveals a statistically significant positive relationship between IR adoption and RMP (β = 0.0052, p = 0.0225). Financial factors also prove significant, with Return on Assets (ROA) showing a positive association with RMP and leverage a negative one. However, these findings must be interpreted with caution. The research encounters substantial methodological constraints, including possible endogeneity and pronounced multicollinearity among variables, which mitigate any causal assertions. Crucially, the generalisability of the results is constrained by the specific context of listed SMEs, whose formal governance and disclosure obligations differ substantially from the vast, unlisted SME population. While providing valuable evidence from an emerging market, this study highlights critical theoretical and methodological challenges that must be addressed in future research to solidify understanding of the IR-RMP nexus before deriving regulatory implications.