Search results

The purpose of this paper is to examine risk disclosures by UK companies within their annual reports. Tests are performed to measure the level of the readability of the risk disclosures and to assess whether directors are deliberately obscuring bad risk news.

The paper draws upon methodologies developed in prior empirical studies of annual report readability. Thus it uses the Flesch Reading Ease formula to measure the readability of the risk disclosures and coefficients of variation are used to measure obfuscation. A content analysis approach is adopted to identify risk disclosures.

The paper finds that the mean Flesch reading ease ratings for the sample companies are all below 50 indicating that the level of readability of the risk disclosures is difficult or very difficult and this supports prior research examining the readability of sample passages in annual reports. No evidence is found to suggest that directors are deliberately obfuscating or concealing bad risk news through their writing style.

The paper also finds that the Flesch reading ease ratings measure the readability, not the understandability, of disclosures and whilst actions can be taken to minimise problems associated with reliability when performing content analysis they cannot be wholly eliminated.

The paper shows that there have been calls for improved risk disclosures to enable stakeholders to better understand a company's risk position. Requiring directors to issue extra risk information will not, however, lead to enhanced risk communication unless the readability of the risk disclosures is also improved.

In this paper it is shown that there have been no prior studies that focus upon testing for readability and obfuscation in risk disclosures. It is important that transparent risk information is provided to the marketplace and therefore this study is valuable in its examination of the clarity of communication of published risk information.

This paper seeks to address a gap in the literature in that it explores community disclosures in annual reports examining annual reports for 5 UK FTSE 100 sectors between, 1974 and 2000.

The sample was bifurcated into types – those with higher public profile and those with lower public profile based on a measure of “proximity to end user”. Two approaches were adopted in the paper: longitudinal volumetric word count mean and frequency of disclosure by company.

The two approaches demonstrated that community disclosure was positively associated with public profile. The findings are consistent with reporting behaviour found in other categories of voluntary disclosure, where disclosure has been found to be associated with the presumed information demands of specific stakeholders. Additionally the research supported a legitimacy theory‐based explanation of cross‐sectional variability in community disclosures. Illustrative disclosures from a number of companies are also presented in the paper.

Further areas of research are suggested by these findings. In addition to articulating the potential value of examining community disclosure patterns in other contexts (e.g. in other sectors and other national situations), and in other media (e.g. internet studies), the findings in this study suggest that there may be value in exploring the ways in which voluntary disclosure responds to other external structural variables.

The contribution of this paper has been to show that a hitherto less‐analysed category of voluntary social disclosure (community disclosure) is cross‐sectionally responsive to the structural vulnerability of companies to issues associated with “general” social concern.

The statement of service performance is a mandatory report provided by local governments in New Zealand. Despite 20 years' reporting experience, the Office of the Auditor-General (2008) criticised the poor quality of these reports. Past theoretical literature has attempted to develop a framework for the accountability expectations of documents provided by public-sector entities (Stewart, 1984). The purpose of this paper is to measure the consistency of the statements of service performance about wastewater services made by New Zealand local governments with the accountability expectations, using an accountability disclosure index. The paper reveals a moderately high level of consistency. “Probity” and “legality” accountability disclosures are high while “process/efficiency” and “performance programme-effectiveness” accountability are less emphasised. The results suggest that accountability expectations provide a useful tool for evaluating statements of service performance.

The purpose of this paper is to explore who uses narrative reporting information contained within online corporate annual reports and assess the relative use of different types of narrative information.

Web server logs were used to analyse over one million instances where information is successfully delivered to users of the corporate web sites of 15 FTSE 350 companies.

The most frequent users of the online annual report are, respectively, private individuals, those registered under internet service providers, employees and professional investors/creditors. The results suggest that those with greater experience and expertise in preparing and using financial accounts adopt different information preferences with respect to the online annual report. Although experienced users such as professional investors, creditors and accounting firms use the annual report to download predominantly detailed financial accounting data, the widespread availability and accessibility of the online annual report allows narratives to provide a source of general company information for employees and a wider stakeholder audience.

The paper presents the first large‐scale survey into the use and users of online annual reports.

To explore the hypothesis that differences in intellectual capital disclosure (ICD) practices can be explained, if in part, by industrial sector (traditional; knowledge intensive) and nationality of origin (Italy; UK).

Content analysis of the annual reports of two reasonably matched samples of both high‐technology and traditional non‐financial firms in Italy and the UK. Univariate and multivariate analyses are then used to test the hypothesis proposed.

Size and industrial sector are found to be predictors of levels of ICD; the hypothesis relating nationality of origin to ICD is not supported.

The main limitation relates to sample size due to the onerous nature of this form of research. Further research following this matched‐sample methodology should attempt to maximise sample sizes allowing for the incorporation of more specific nationally of origin factors.

Owing to the increasing importance of intangibles and intellectual capital, how these are reported is of interest to a large range of stakeholders. There is, as yet, no universally accepted form, or indeed regulation, of ICD.

The matched‐sample methodology on international ICD comparison expands on extant approaches.

The paper aims to examine the link between firm‐level large share price movements, firm‐specific company announcements and corporate governance. Stock market regulation in the UK requires firms to disclose new price‐sensitive information immediately via official news providers. The paper investigates whether large share price movements are accompanied by firm disclosure. It also investigates whether corporate governance attributes influence the degree of disclosure by firms.

The disclosure measure is constructed by identifying the largest abnormal daily stock returns for sample firms, and then firm‐specific announcements in the three‐day window centred on the abnormal return day are searched. Corporate governance variables known to influence disclosure practice are then collected and tested to ascertain whether they influence disclosure for positive and negative (good and bad announcements) abnormal returns.

Large share price movements are accompanied by an official share price movement in 45.2 per cent of cases. This rises to 62.9 per cent when new analyst or newspaper articles are included as potential drivers of the abnormal share price return. The higher the proportion of non‐executive directors and CEO/chair duality lead to a higher incidence of bad news disclosure, suggesting increased scrutiny works. The higher the level of CEO and board ownership the lower the level of disclosure. Finally, institutional ownership concentration appears to negatively influence the level of disclosure.

Higher levels of corporate governance are shown to lead to better firm disclosure. At the same time, the authors find that in almost 40 per cent of large abnormal share price returns no information has come to the market to drive the share price. Thus, the paper has important messages for regulators, who need to investigate why prices often move a long way without accompanying news. Shareholders, particularly institutions, should ensure high levels of disclosure by company directors.

In examining the effects of the Exxon Valdez oil spillage on corporate social reporting (CSR) in the annual reports of oil companies, Patten suggested examining companies in other industries and their response to social (e.g. environmental) threats. This paper examines environmental and social reporting in five companies representing three FTSE sectors, selected according to an intuitive understanding of society’s perceptions of their depth of “sin” or supposed unethical behaviour. Social disclosure data were captured from annual corporate reports between 1975 and 1997. Results suggest that legitimacy theory may be an explanation of disclosure in some cases but not in others. The distorting effects of perception (of legitimacy‐threatening factors) and the increase in choices of disclosure media partly explain the mixed results and these factors and it is suggested, challenge the usefulness of future “annual‐report only” studies.

This longitudinal study aims to examine the extent to which football clubs in the Premier League communicate community activities in their annual reports through social disclosure. The research also seeks to examine the relevance and use of the annual report as a disclosure medium by football clubs. The need for social disclosure is examined in conjunction with media coverage of issues affecting Premier League clubs.

This study is deductive using three main hypotheses to test relevant underpinning theory used within the research. The study uses content analysis of annual report social disclosures of ten Premier League football clubs from 1993 to 2002, covering the first ten years of the Premier League. A questionnaire was used to evaluate the use of annual reports by those clubs. In addition, media reporting data from The Sunday Times is examined.

This study finds that there has been an increase in adverse media reporting concerning football, football clubs and their activities. One way in which clubs have responded to this increased attention and criticism is by expanding their community activities and associated social reporting, although reporting varies between clubs. The study finds that football clubs do value the annual report as an effective means of communication.

The authors acknowledge that some limitations inevitably affect the generalisabilty of this research. The use of content analysis, the precise methods adopted and the reliance on The Sunday Times constitute limitations. Nevertheless, the research has shown that clubs do engage with their local communities and have increased their reporting of such activities. The research has implications for those football clubs who fail to report their social activities. Further research could explore, why some clubs disclose more than others.

Football is a visible and important part of the UK economy. The study of social reporting by football clubs is in its infancy and this paper tests and applies relevant accounting theory to that sector. It shows that football clubs have begun to take social disclosure seriously within their annual reports.

The purpose of this paper is to update and re‐examine the role of corporate narrative reporting in improving investors' ability to better forecast future earnings change. The paper also aims to construct a risk factor for disclosure quality (DQ) and test whether such a factor is useful in explaining the time‐series variation of UK stock returns.

The paper uses the return‐future earnings regression model to update and re‐examine the value relevance of DQ for investors. It also constructs a DQ factor and adds it to Fama‐French three‐factor model. This is undertaken in order to investigate the usefulness of such a factor in explaining the time‐series variation of UK portfolio returns over and above the role of the original Fama‐French factors.

The paper contributes to the market‐based accounting research in three crucial ways. First, it offers updated evidence on the usefulness of corporate narrative reporting to investors. Second, it offers evidence that the DQ factor is a significant risk factor in the UK. Third, and finally, it finds that the Fama‐French factors might contain DQ‐related information.

The results suggest that narrative reporting contains value‐relevant information for the stock market. Therefore, regulators should think about asking companies to produce compulsory narrative sections (i.e. operating and financial reviews) in their annual reports.

To the best of the authors' knowledge, this paper is the first to construct and add the DQ factor in the original Fama‐French factors.

In 1899 the medical practitioners of Dublin were confronted with an outbreak of a peculiar and obscure illness, characterised by symptoms which were very unusual. For want of a better explanation, the disorder, which seemed to be epidemic, was explained by the simple expedient of finding a name for it. It was labelled as “beri‐beri,” a tropical disease with very much the same clinical and pathological features as those observed at Dublin. Papers were read before certain societies, and then as the cases gradually diminished in number, the subject lost interest and was dropped.