Corporate narrative reporting

Citation

Hussainey, K. (2012), "Corporate narrative reporting", Managerial Auditing Journal, Vol. 27 No. 2. https://doi.org/10.1108/maj.2012.05127baa.001

Corporate narrative reporting

Article Type: Guest editorial From: Managerial Auditing Journal, Volume 27, Issue 2

This special issue of Managerial Auditing Journal (MAJ) is devoted to publishing high-quality research papers that advance our understanding of current practice in corporate narrative reporting in developed and developing countries. We sought conceptual and empirical studies that draw on a variety of theoretical perspectives and in quantitative as well as qualitative methodological approaches, which add to our understanding of the nature, potential drivers and economic benefits of corporate narrative reporting. In particular, topics sought included narrative reporting regulations; narrative reporting-related disclosure theories; types of information in narrative reporting and potential users; professional bodies’ views on the potential usefulness of narrative reporting; the effect of corporate governance on narrative reporting; narrative reporting outside the hard copy annual reports; measuring the quality of narrative reporting; the stock market reaction to different types of narrative reporting; audit assurance on narrative reporting and cross-countries studies on narrative reporting. Before the deadline for submission expired, the call for papers generated 26 submitted papers. Each paper was blind reviewed by at least two referees. The review process generated four contributions and each of the papers in this special issue looks at corporate narrative reporting from different research orientations.

In the first article in this special issue, Sabri Boubaker, Faten Lakhal and Mehdi Nekhili tackle an interesting research question:

RQ1. What are the nature and determinants of disclosure outside the hard copy annual reports?

In particular, they are concerned with internet reporting by French listed companies. The authors use a disclosure index to measure the level of online reporting. Their index encompasses the two components of internet reporting: the content information and the presentation format features. They then test the impact of firm-specific characteristics and corporate governance mechanisms on disclosure level. The authors find that French companies report existing rather than timely information on their web sites. They also find that firm size, audit type, ownership structure, the issuance of bonds or equities and industry type are the main drivers for French companies to voluntarily report information online. Further research is needed to examine the impact of IFRS on the information displayed by French companies on their web sites. It will also be interesting to examine the economic consequences of internet reporting by French companies (i.e. the effect of online disclosure on the share price anticipation of earnings; analyst forecasts and cost of capital).

The second paper by Hakim Ben Othman examines the value relevance of one type of narrative reporting; corporate governance disclosure. In particular, he is concerned with board structure and process reporting and its potential impact on corporate performance. He contributes to disclosure studies by offering the first cross-countries study of its type, examining the effect of governance disclosure on corporate performance for a sample of African emerging countries. The findings of Hakim’s paper suggest that African companies from countries with historical links with Great Britain exhibit substantially higher levels of board structure and process reporting than those from countries having historical links with France. In addition, his findings show that levels of board structure and process reporting affect corporate performance of financial Anglophone African companies, but he did not find the same results for non-financial Anglophone African companies. The study suggests that the Anglophone/Francophone business culture shapes the level of corporate governance reporting and its impact on corporate performance in Africa. Further researchers need to consider the effect of other types of corporate governance reporting or an aggregated score for corporate governance reporting on firm performance.

The third paper by Leopold Bayerlein and Paul Davidson contributes to narrative reporting literature by addressing a methodological issue. They develop and apply a novel connotation-based obfuscation assessment approach. They assess the level of and the relationship between readability and obfuscation in a sample of 87 chairman statements. They find that the mid-section of the chairman statements is significantly more difficult to read than the first and last sections. They find that this reading difficulty is due to the attempt by preparers to “overshadow” some negative news through the provision of positive news in the same sentence. The paper ends with suggestions for future research, including exploring the direct link between the textual atrributes of individual sentences and the financial and/or strategical success of a firm. The application of connotation-based readability and obfuscation assessments is also recommended for future research.

The fourth paper by Zakaria Ali Aribi and Simon S. Gao addresses the impact of Islam on narrative reporting of corporate social responsibility disclosure (CSRD) in Islamic financial institutions in the Gulf region. Using the content analysis approach, the authors analyse a sample of 21 annual reports of Islamic financial institutions to identify levels of CSRD. They find that Islamic religion affects levels of CSRD. In particular, they find that Islamic banks report CSR information and Islamic-social responsibility-related information. They also find that the Shari’a Supervisory Board, a narrative statement in the annual reports, contains a large portion of CSRD. Finally, the authors find that Islamic banks disclose other Islamic-related information such as Zakah (charity donation) and free interest rate loans. These banks also report information about their compliance with Islamic principals and relevant information to employees and the community. Further research ideas are suggested by the authors, including undertaking a large-scale study to examine the motivations and the impact of CSRD on banks performance in the context of corporate governance and accountability in Islam.

In sum, the above-mentioned papers have considered different aspects of corporate narrative reporting and suggested several ideas for future researchers. The papers also have practical implications. I hope that academics and policy makers will find the papers in this special issue a useful contribution to the current debates related to corporate narrative reporting. I would like to thank all of the referees for their time, constructive and valuable comments in reviewing the papers. I would also like to thank all of those associated with MAJ for their guidance throughout the process.

Khaled HussaineyGuest Editor