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Article
Publication date: 2 October 2009

John Holland

This paper aims to use a grounded theory approach to reveal that corporate private disclosure content has structure and this is critical in making “invisible” intangibles…

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1094

Abstract

Purpose

This paper aims to use a grounded theory approach to reveal that corporate private disclosure content has structure and this is critical in making “invisible” intangibles in corporate value creation visible to capital market participants.

Design/methodology/approach

A grounded theory approach is used to develop novel empirical patterns concerning the nature of corporate disclosure content in the form of narrative. This is further developed using literature of value creation and of narrative.

Findings

Structure to content is based on common underlying value creation and narrative structures, and the use of similar categories of corporate intangibles in corporate disclosure cases. It is also based on common change or response qualities of the value creation story as well as persistence in telling the core value creation story. The disclosure is a source of information per se and also creates an informed context for capital market participants to interpret the meaning of new events in a more informed way.

Research limitations/implications

These insights into the structure of private disclosure content are different to the views of relevant information content implied in public disclosure means such as in financial reports or in the demands of stock exchanges for “material” or price sensitive information. They are also different to conventional academic concepts of (capital market) value relevance.

Practical implications

This analysis further develops the grounded theory insights into disclosure content and could help improve new disclosure guidance by regulators.

Originality/value

The insights create many new opportunities for developing theory and enhancing public disclosure content. The paper illustrates this potential by exploring new ways of measuring the value relevance of this novel form of contextual information and associated benchmarks. This connects value creation narrative to a conventional value relevance view and could stimulate new types of market event studies.

Details

Qualitative Research in Financial Markets, vol. 1 no. 3
Type: Research Article
ISSN: 1755-4179

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Article
Publication date: 4 December 2020

Dalia Hussein El-Sayed, Eman Adel, Omar Elmougy, Nadeen Fawzy, Nada Hatem and Farida Elhakey

This study examines whether manipulation in attributes of corporate narrative disclosures and the use of graphical representations can bias non-professional investors'…

Abstract

Purpose

This study examines whether manipulation in attributes of corporate narrative disclosures and the use of graphical representations can bias non-professional investors' judgment towards firms' future performance, in an emerging market context.

Design/methodology/approach

The authors conduct three different experiments with a 2 × 2 between-subjects design, using accounting and finance senior undergraduate students to proxy for the non-professional investors.

Findings

Results show that simple (more readable) disclosures improve non-professional investors' judgment towards firms' future performance. In addition, it is found that non-professional investors are prone to a recency effect from the intentional ordering of narrative information, when using complex (less readable) narratives. However, no primacy effect is found, when using simple (more readable) disclosures. The results further provide evidence that the inclusion of graphical representations, along with the manipulated narrative disclosures, can moderate the recency effect of information order, when using less readable and complex narrative disclosures.

Research limitations/implications

The results reveal that although the content of corporate disclosures can be objective, neutral and relevant, manipulation in textual features and the use of graphical presentations, can interact to impact how non-professional investors perceive and process the disclosed information. This study provides an Egyptian evidence regarding this issue, as the majority of prior studies concentrate on developed capital markets. In addition, it contributes to prior studies evaluating the appropriateness of the Belief Adjustment Model predictions about the effect of textual presentation order on decision-making, by providing evidence from an emerging market.

Practical implications

Results attempt to increase the awareness of investors and encourage them to use multiple sources of information to avoid the probable bias that can result from management's manipulation of narratives. In addition, the study could be of interest to regulators and standard-setters, where the results reveal the need for guidelines and regulations to guide the disclosure of narrative information and the use of graphical information in corporate reports.

Originality/value

To the best of the authors' knowledge, this is the first study to examine the effect of two impression management strategies in narrative disclosures (readability and information order), along with the use of graphical representations, on non-professional investors' judgment in an emerging market, like Egypt.

Details

Journal of Applied Accounting Research, vol. 22 no. 1
Type: Research Article
ISSN: 0967-5426

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Article
Publication date: 17 September 2019

Richard Fisher, Chris J. van Staden and Glenn Richards

The purpose of this paper is to investigate: how dimensions of tone vary across different forms of corporate accountability narrative; the impact of tone on readability;…

Abstract

Purpose

The purpose of this paper is to investigate: how dimensions of tone vary across different forms of corporate accountability narrative; the impact of tone on readability; and the determinants of tone, including consideration of its use in impression management.

Design/methodology/approach

Using a multi-year sample of listed companies, the authors measure dimensions of tone across multiple narrative types within the annual report and standalone corporate social responsibility report. Statistical analysis is used to investigate variations of tone across narrative type, each dimension’s influence on readability and the role of antecedent factors.

Findings

Analysis reveals that dimensions of tone vary significantly across narrative types (genres) suggesting that tonal patterns form part of the specific stylistic conventions of each genre. Tone is found to be a significant determinant of readability. Little evidence of obfuscation using tone was found, while disclosure type is the most salient determinant of tone.

Practical implications

The study illuminates latent or underlying disclosure norms that can facilitate the identification of “exceptional” cases that do not conform with expected tonal patterns of a particular narrative type and may warrant closer inspection by preparers, auditors or regulators. The issues raised regarding the clarity and balance of textual disclosures highlight the challenges in regulating corporate narratives.

Originality/value

This study highlights that tone is a more nuanced and layered concept than suggested by much of the prior literature. Further, tone ought to be considered in studies examining textual complexity.

Details

Accounting, Auditing & Accountability Journal, vol. 33 no. 1
Type: Research Article
ISSN: 0951-3574

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Article
Publication date: 19 April 2011

Indra Abeysekera

The purpose of this paper is to investigate whether the political setting (civil war versus temporary truce) in a country has an influence on firms' current narrative

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1912

Abstract

Purpose

The purpose of this paper is to investigate whether the political setting (civil war versus temporary truce) in a country has an influence on firms' current narrative, visual, and numerical intellectual capital disclosure being included in the current market value of equity.

Design/methodology/approach

Using content analysis for data generation, this study identifies narrative, visual, and numerical intellectual capital disclosure in firms' annual reports. Financial data were obtained from firms' annual reports and the stock exchange. Fixed effect panel regression was conducted separately for the civil war period and temporary truce period.

Findings

The paper finds that during the period entirely beset by civil war, the current market value of equity includes net book value and current earnings only, and does not include narrative, visual, or numerical intellectual capital disclosure. During the period of temporary truce, the current market value of equity includes net book value, current earnings, and narrative disclosure, but not visual or numerical intellectual capital disclosure.

Practical implications

The findings provide insights into the effectiveness of disclosure strategies in politically unstable environments.

Originality/value

This study analyses the disclosure strategies in a civil war and temporary truce context.

Details

Journal of Intellectual Capital, vol. 12 no. 2
Type: Research Article
ISSN: 1469-1930

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Article
Publication date: 19 July 2011

Malcolm Smith, Yinan Dong and Yun Ren

The purpose of this paper is to investigate the relationship between narrative disclosures and corporate performance based on Australian evidence. In particular it builds…

Abstract

Purpose

The purpose of this paper is to investigate the relationship between narrative disclosures and corporate performance based on Australian evidence. In particular it builds a model which discriminates between good and poor performing companies based on their corporate narratives.

Design/methodology/approach

A sample of Australian manufacturing companies is classified into two groups based on earnings per share (EPS) movement between 2008 and 2009. A content analysis of their discretionary narrative disclosures is used to classify and predict group membership.

Findings

This study finds that the word‐based variables based on discretionary disclosures are significantly correlated with corporate performance. Word‐based variables can successfully classify companies between “good” performers and “poor” performers with an accuracy of 86 percent.

Research limitations/implications

The relatively small sample size, for Australian manufacturing companies, limits both the predictive ability of the model and its generalisability elsewhere.

Practical implications

The findings of the paper demonstrate that certain keywords, notably the use of “high/highest” and “dividends” are significantly and positively associated with superior performance.

Originality/value

The study builds a classification model for continuing Australian companies, whereas prior research focuses on UK and US companies and is based on a healthy/failed distinction.

Details

Asian Review of Accounting, vol. 19 no. 2
Type: Research Article
ISSN: 1321-7348

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Article
Publication date: 19 June 2009

Niamh M. Brennan, Encarna Guillamon‐Saorin and Aileen Pierce

This paper aims to develop a holistic measure for analysing impression management and for detecting bias introduced into corporate narratives as a result of impression management.

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10934

Abstract

Purpose

This paper aims to develop a holistic measure for analysing impression management and for detecting bias introduced into corporate narratives as a result of impression management.

Design/methodology/approach

Prior research on the seven impression management methods in the literature is summarised. Four of the less‐researched methods are described in detail, and are illustrated with examples from UK annual results' press releases (ARPRs). A method of computing a holistic composite impression management score based on these four impression management methods is developed, based on both quantitative and qualitative data in corporate narrative disclosures. An impression management bias score is devised to capture the extent to which impression management introduces bias into corporate narratives. An example of the application of the composite impression management score and impression management bias score methodology is provided.

Findings

While not amounting to systematic evidence, the 21 illustrative examples suggest that impression management is pervasive in corporate financial communications using multiple impression management methods, such that positive information is exaggerated, while negative information is either ignored or is underplayed.

Originality/value

Four impression management methods are described in detail, illustrated by 21 examples. These four methods are examined together. New impression management methods are studied in this paper for the first time. This paper extends prior impression management measures in two ways. First, a composite impression management score based on four impression management techniques is articulated. Second, the composite impression management score methodology is extended to capture a measure for bias, in the form of an impression management bias score. This is the first time outside the USA that narrative disclosures in press releases have been studied.

Details

Accounting, Auditing & Accountability Journal, vol. 22 no. 5
Type: Research Article
ISSN: 0951-3574

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Article
Publication date: 1 January 2012

Zakaria Ali Aribi and Simon S. Gao

This study aims to examine the influence of Islam on corporate social responsibility (CSR) and corporate social responsibility disclosure (CSRD) in Islamic financial…

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4726

Abstract

Purpose

This study aims to examine the influence of Islam on corporate social responsibility (CSR) and corporate social responsibility disclosure (CSRD) in Islamic financial institutions (IFIs) with a focus on an analysis of narrative reporting.

Design/methodology/approach

Using content analysis, this study analyzes the narrative disclosures of corporate social responsibility of 21 IFIs operating in the Gulf region.

Findings

This study provides evidence of Islamic influence on the CSRD of IFIs. It finds that the largest part of CSRD produced by the IFIs is the disclosure of reports of the Shari'a Supervisory Board. IFIs also disclose other Islamic information (e.g. “Zakah” and charity donation, and free interest loan) and report on their compliance with Islam along with information of philanthropy, employees and community.

Originality/value

This study provides a valuable contribution to researchers and practitioners, as it extends the understanding of how the narrative disclosures on CSR were produced by IFIs and the influence of religion on CSRD.

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Article
Publication date: 1 December 2000

Malcolm Smith and Richard J. Taffler

Explores whether the firm’s discretionary narrative disclosures measure its financial risk of bankruptcy. Specifically examines the existence of an association between the…

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11989

Abstract

Explores whether the firm’s discretionary narrative disclosures measure its financial risk of bankruptcy. Specifically examines the existence of an association between the content of the chairman’s statement and firm failure. Show that these statements are closely associated with financial performance, reinforcing the argument that such unaudited disclosures contain important information. The results have implications both for the form and content of future narrative disclosures by management.

Details

Accounting, Auditing & Accountability Journal, vol. 13 no. 5
Type: Research Article
ISSN: 0951-3574

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Article
Publication date: 31 March 2021

Elisabeth Albertini, Fabienne Berger-Remy, Stephane Lefrancq, Laurence Morgana, Miloš Petković and Elisabeth Walliser

This research aims to contribute to the current discussion led by international accounting bodies on intellectual capital narratives. Before setting a standard, a…

Abstract

Purpose

This research aims to contribute to the current discussion led by international accounting bodies on intellectual capital narratives. Before setting a standard, a preliminary step is to highlight intellectual capital components' sources of value. The objective of this exploratory paper is to contribute to the discussion by proposing a detailed description and taxonomy of intellectual capital based on an analysis of discretionary accounting narrative disclosures in CEO letters.

Design/methodology/approach

To answer the research question, a computerised lexical content analysis was done of 241 letters from the CEOs of S&P Euro 350 companies addressed to shareholders.

Findings

Beyond the required disclosures about balance sheet intangibles, this study brings to light discretionary narratives about human, digital, customer and environmental capital and their interactions. In particular, CEOs are promoting two new themes, environmental capital and digital capital, as major contributors to value creation.

Research limitations/implications

The limitations of this study are inherent in the media studied, namely the CEOs' letters to shareholders, which were written as part of the firms' official communication.

Practical implications

The main contribution of the research is a detailed description of the intellectual capital components that CEOs consider to be at the heart of their companies' models to create value. Human and customer capital were already familiar under the previous classification, but CEOs present digital and environmental capital as areas of opportunity or risk in their discretionary narratives.

Originality/value

The article contributes to the current international discussions on intellectual capital by focusing on discretionary accounting narratives. It seeks to provide guidelines concerning future standards in the current stage of intellectual capital research.

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Article
Publication date: 9 April 2018

Brian A. Rutherford

This paper aims to analyse the nature and extent of convergence within the literature of the narrative turn in narrative accounting research.

Abstract

Purpose

This paper aims to analyse the nature and extent of convergence within the literature of the narrative turn in narrative accounting research.

Design/methodology/approach

The paper offers an actor–network–theoretic perspective drawing on Latour’s theory of citation and Shwed and Bearman’s development of that theory to analyse patterns of convergence.

Findings

The paper finds that across the exemplars of narrative turn research examined, there is only a limited level of epistemic engagement so that exemplars achieve their status without undergoing trials of strength.

Research limitations/implications

The paper argues that the resources of the relevant academic community are spread so thinly that each seam – each research question, methodology or method and research context – is mined by no more than a small handful of researchers unable to generate a meaningful volume of contestation. Steps are suggested to better focus research activity.

Originality/value

The use of Latour’s theory of citation to analyse patterns of convergence in accounting research is innovative. The paper proposes a substantial change in the community’s approach to narrative turn research on accounting narratives.

Details

Meditari Accountancy Research, vol. 26 no. 1
Type: Research Article
ISSN: 2049-372X

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