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Narratives vs Numbers in the Annual Report: Are They Giving the Same Message to the Investors?

Pascal Balata (University of Douala)
Gaétan Breton (Département des sciences comptables, Université du Québec à Montréal, C.p. 8888, Succ. Centre‐Ville, Montréal (Qc), H3C 3P8)

Review of Accounting and Finance

ISSN: 1475-7702

Article publication date: 1 February 2005



The annual report has two parts, financial statements and narrative sections. Commentators have raised doubts about the harmony of the two parts. The financial statements are audited, therefore submitted to a form of control. The narrative sections are free style, open to confusion and manipulation. Users are potentially exposed to contradictory messages producing an effect of dissonance. We do not test the presence of dissonance for the users, but the presence of contradictory information prone to produce dissonant effect. We conduct a content analysis of the president letter and we build an index of the level of optimism contained in it. Then, we compare this index with the change in key numbers or ratios from the financial statements. Our results indicate a moderate level of divergence between the narrative sections and the accounting data. However, this level is sufficient to raise questions about the necessity to regulate the discourse accompanying the financial statements.



Balata, P. and Breton, G. (2005), "Narratives vs Numbers in the Annual Report: Are They Giving the Same Message to the Investors?", Review of Accounting and Finance, Vol. 4 No. 2, pp. 5-14.



Emerald Group Publishing Limited

Copyright © 2005, Emerald Group Publishing Limited

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