Voluntary disclosure of intangibles and analysts’ earnings forecasts and recommendations

2016 ◽  
Vol 17 (4) ◽  
pp. 421-439 ◽  
Author(s):  
Anis Maaloul ◽  
Walid Ben Amar ◽  
Daniel Zeghal
Keyword(s):  
Voluntary Disclosure ◽  
Intangible Assets ◽  
Value Relevance ◽  
Financial Analysts ◽  
Earnings Forecasts ◽  
Annual Reports ◽  
Current Debate ◽  
Content Type ◽  
Corporate Managers ◽  
Relational Assets

Purpose The purpose of this paper is to investigate the relationship between voluntary disclosure of intangibles and financial analysts’ earnings forecasts properties. Design/methodology/approach Disclosures about intangible assets were hand-collected through content analysis of annual reports of a sample of US non-financial firms, while analysts’ earnings forecasts properties were collected from Bloomberg Professional database. The authors relied on correlation and multivariate regression analyses to test the research hypotheses. Findings The results show that increased intangible disclosures affect analysts’ earnings forecasts accuracy, dispersion, and favourable consensus recommendations. However, this effect varies according to the nature of intangible assets. Practical implications The results may be of interest to different market participants such as corporate managers, financial analysts, and standards setting bodies that recently published guidelines on voluntary disclosure of intangibles. Originality/value This study develops a new comprehensive index to measure the content of narrative disclosures about a large number of intangibles, such as human, structural, and relational assets. The findings contribute to the current debate on the value-relevance of narrative disclosures on intangibles to investors and financial analysts.

Do companies disclose intellectual capital in their annual reports? New evidence from explorative content analysis

2020 ◽  
Vol 21 (6) ◽  
pp. 853-871 ◽  
Author(s):  
Petr Parshakov ◽  
Elena Shakina
Keyword(s):  
Content Analysis ◽  
Intellectual Capital ◽  
Voluntary Disclosure ◽  
Intangible Assets ◽  
Internal Validity ◽  
Annual Reports ◽  
Empirical Literature ◽  
Narrative Form ◽  
Content Type ◽  
Narrative Forms

PurposeThis study suggests an alternative to confirmatory content analysis (CA) and empirically demonstrates that explorative CA enables new insights into the mechanism of intellectual capital (IC) disclosure. In so doing, this research contributes to both methodological and empirical advancements in IC disclosure research.Design/methodology/approachEmploying the assumptions of positive accounting theory and taking book value of intangible assets as a reference, our research design utilizes well-established text-mining (TM) tools based on a least absolute shrinkage and selection operator regression. We assume that the degree of cohesion between officially disclosed and evaluated intangible assets on balance sheets and those contextually delivered in narrative form may affect how IC is ultimately disclosed in annual reports.FindingsOur main finding is in line with the results and criticism of previous studies. We show that companies do not extensively disclose IC in their annual reports. However, some narrative forms for IC disclosure are identified and confirmed by several robustness checks.Research limitations/implicationsFirst, the findings provide internal validity only for large US enterprises. These firms have similar, well-structured reporting requirements. This analysis might be enriched by an examination and a comparison of different institutional contexts, such as emerging countries. Second, following previous studies, annual reports serve as the source of data. Consequently, the findings are relevant only for mandatory and voluntary disclosure of IC, mitigating the relevance of this study for contexts of involuntary disclosure.Originality/valueThis study makes two contributions. First, we add to the empirical literature by offering one more piece of evidence on whether and, if so, the extent to which companies disclose IC in their annual reports. Second, we provide further examination of confirmatory CA by proposing a number of statistically validated codes and tokens that are indicators of IC communication by companies.

Voluntary information disclosure and sell-side analyst coverage intensity

2017 ◽  
Vol 16 (2) ◽  
pp. 260-280 ◽  
Author(s):  
Amal Hamrouni ◽  
Ramzi Benkraiem ◽  
Majdi Karmani
Keyword(s):  
Voluntary Disclosure ◽  
Information Disclosure ◽  
Stock Exchange ◽  
Annual Reports ◽  
Analyst Coverage ◽  
Content Type ◽  
Corporate Managers ◽  
Financial Firms ◽  
High Level ◽  
The Relationship

Purpose This paper aims to investigate whether a high level of voluntary disclosure attracts sell-side analysts. In other words, the authors check whether the number of analysts following a given firm increases with the extent of voluntary information that corporate managers provide in annual reports. Design/methodology/approach The paper relies on regression analyses to study the relationship between the level of coverage by sell-side analysts and the extent of voluntary disclosure for a sample of 155 non-financial firms listed on the Euronext Paris stock exchange and members of the SBF 250 index. Findings The empirical results show that the number of analysts following a given firm increases with the extent of voluntary disclosure. Consequently, the authors conclude that analysts are interested in the volume of information provided voluntarily by corporate managers. Their interest varies across the voluntary-information categories (strategic, financial, non-financial and governance) disclosed in annual reports. Originality/value This study extends previous research by investigating sell-side analysts’ preferences in terms of voluntary-information categories in annual reports. A better understanding of the effects of sub-categories of voluntary information is useful to corporate managers wishing to meet market expectations and attract sell-side analysts. In fact, the authors verify how each category of disclosed information (strategic, financial, non-financial and governance) affects the analyst coverage intensity. In addition, the authors apply our study in the rather interesting empirical setting that is France, which is characterized by a low investor protection and a large number of active analysts.

scholarly journals Does graphical reporting improve risk disclosure? Evidence from European banks

2018 ◽  
Vol 19 (1) ◽  
pp. 161-180 ◽  
Author(s):  
Michael Jones ◽  
Andrea Melis ◽  
Silvia Gaia ◽  
Simone Aresu
Keyword(s):  
Credit Risk ◽  
Impression Management ◽  
Perspective Taking ◽  
Voluntary Disclosure ◽  
Cognitive Biases ◽  
Annual Reports ◽  
Theory Approach ◽  
Risk Disclosure ◽  
Content Type ◽  
Incremental Information

Purpose The purpose of this paper is to examine the voluntary disclosure of risk-related issues, with a focus on credit risk, in graphical reporting for listed banks in the major European economies. It aims to understand if banks portray credit risk-related information in graphs accurately and whether these graphs provide incremental, rather than replicative, information. It also investigates whether credit risk-related graphs provide a fair representation of risk performance or a more favourable impression than is warranted. Design/methodology/approach A graphical accuracy index was constructed. Incremental information was measured. A multi-level linear model investigated whether credit risk affects the quantity and quality of graphical credit risk disclosure. Findings Banks used credit risk graphs to provide incremental information. They were also selective, with riskier banks less likely to use risk graphs. Banks were accurate in their graphical reporting, particularly those with high levels of credit risk. These findings can be explained within an impression management perspective taking human cognitive biases into account. Preparers of risk graphs seem to prefer selective omission over obfuscation via inaccuracy. This probably reflects the fact that individuals, and by implication annual report’s users, generally judge the provision of inaccurate information more harshly than the omission of unfavourable information. Research limitations/implications This study provides theoretical insights by pointing out the limitations of a purely economics-based agency theory approach to impression management. Practical implications The study suggests annual reports’ readers need to be careful about subtle forms of impression management, such as those exploiting their cognitive bias. Regulatory and professional bodies should develop guidelines to ensure neutral and comparable graphical disclosure. Originality/value This study provides a substantive alternative to the predominant economic perspective on impression management in corporate reporting, by incorporating a psychological perspective taking human cognitive biases into account.

Enhanced business reporting: value relevance and determinants of valuation-related disclosures

2017 ◽  
Vol 18 (4) ◽  
pp. 832-867 ◽  
Author(s):  
Christine Reitmaier ◽  
Wolfgang Schultze
Keyword(s):  
Decision Making ◽  
Content Analysis ◽  
Value Relevance ◽  
Annual Reports ◽  
Valuation Theory ◽  
Voluntary Disclosures ◽  
Content Type ◽  
Book Value ◽  
Business Reporting ◽  
Market Values

Purpose Enhanced business reporting (EBR) seeks to address the information needs of investors when making company valuations for investment decisions. The purpose of this paper is to analyze the relevance for market valuation of EBR disclosures that are directly related to firm valuation (value-based reporting (VBR)). Design/methodology/approach Data are hand collected from annual reports of German publicly listed companies over five years. The content analysis is based on the valuation-related disclosure framework of the German Schmalenbach Society of Business Administration. A 2SLS approach accounts for potential endogeneity. Findings Share-based compensation, leverage, corporate size, and share volatility are significant determinants of VBR. The level of VBR is significantly associated with market values and provides additional market value explanatory power, indicating its relevance to investors in the process of valuation and decision making. Also, the relevance of book value and earnings for explaining market values increases for firms with better VBR. The findings are robust to the exclusion of banks and assurance companies and to alternative model and variable specifications. Research limitations/implications The research contributes to the literature on voluntary disclosures by testing an EBR framework explicitly derived from valuation theory. The results provide indirect evidence of the investors’ use of respective valuation techniques in decision making. A contribution is made to the value relevance literature by showing that valuation-related disclosures constitute a suitable proxy for “other information” in the Ohlson’s (1995) model. Such disclosures complement traditional accounting metrics, i.e. book value and earnings, as basis for valuations. Potential caveats relate to the content analysis of annual reports and the endogeneity of voluntary disclosures. Originality/value This paper informs the debate on further developments of EBR in helping to identify important components thereof.

The effects of intangible assets on firm performance

2019 ◽  
Vol 34 (3/4) ◽  
pp. 148-168
Author(s):  
Jannatul Ferdaous ◽  
Mohammad Mizanur Rahman
Keyword(s):  
Firm Performance ◽  
Panel Data ◽  
Intangible Assets ◽  
Balance Sheet ◽  
Poor Performance ◽  
Significant Rise ◽  
Annual Reports ◽  
Content Type ◽  
Track Record ◽  
Effect Estimation

Purpose Using the resource-based view and knowledge-based view as theoretical backdrop, the purpose of this paper is to explore the relationship between intangible assets and firm performance. Design/methodology/approach The firms’ audited annual reports were collected during the period of 2007–2017 from 49 listed manufacturing firms of four industries in DSE, Bangladesh. This inductive research uses panel data (fixed-effect) estimation technique for balanced panel data to measure, describe, and analyze the firm performance. Findings After controlling some specific variables, the results reveal mixed behavioral effects of intangible assets on firm performance. Even if intangible assets trigger a significant rise in the firms’ EPS (a measure of financial performance), the firms cannot maximize shareholders’ wealth due to their poor performance in the stock market of Bangladesh. Practical implications The proposed models could be important tools for managers to integrate intangible assets in their decision process. The proposed models could also be important tools for investors to select their portfolios that have a track record for continuous investment in intangible assets in an efficient and sustainable way. Originality/value Intangible assets are largely absent from the firms’ balance sheet. Consequently, previous empirical research works struggled to measure and quantify the effects of intangible assets on firm performance. The study fills that gap in the understanding of intangible assets’ nature, measurement method, and their effects on firm performance.

Voluntary disclosure of accounting ratios and firm-specific characteristics: the case of GCC

2020 ◽  
Vol 18 (2) ◽  
pp. 301-324
Author(s):  
Ayman E. Haddad ◽  
Fatima Baalbaki Shibly ◽  
Ruwaidah Haddad
Keyword(s):  
Voluntary Disclosure ◽  
Manufacturing Firms ◽  
Annual Reports ◽  
Content Type ◽  
Market Participants ◽  
Corporate Reporting ◽  
Data Regression ◽  
Incident Rate ◽  
Rate Ratios ◽  
Accounting Ratios

Purpose The purpose of this study is to investigate the voluntary disclosure of accounting ratios in the corporate annual reports of manufacturing firms in the Gulf Cooperation Council (GCC) and determines whether an association exists between voluntary disclosure and firm-specific characteristics namely, size, profitability, leverage, liquidity and efficiency. Design/methodology/approach A sample of 53 GCC listed manufacturing firms and 263 firm-year observations were observed over the period 2011 to 2015. A count data regression (Poisson) with incident rate ratios was used to identify the relationship between firms’ voluntary disclosures of accounting ratios and other firm-specific characteristics. Findings During the period under review, the voluntary disclosure of accounting ratios provided in annual reports of GCC firms were found to be exceedingly low. On average, a GCC company discloses at most two accounting ratios in its annual reports. The results also show that the profitability ratios are the most popularly reported ones. Controlling for family board domination, the results also reveal that structure-related variables (firm size and leverage) are positively associated with accounting ratio disclosures. However, performance-related variables (profitability, liquidity and efficiency) have no significant effect on disclosures. The authors conclude that signaling theory as implied in the performance-related variables is not strongly supported in the GCC region. Originality/value This is the first known study to investigate the disclosure of accounting ratios and its determinants within the context of GCC. The findings of this study could be beneficial to both agents and principals in assessing the associated risks. The study provides regulators and market participants an understanding of the corporate reporting activities of manufacturing firms in the GCC and who accordingly will be able to consider associated policy implementation.

Internal control quality and voluntary disclosure: does CEO duality matter?

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Hichem Khlif ◽  
Khaled Samaha ◽  
Ines Amara
Keyword(s):  
Internal Control ◽  
Voluntary Disclosure ◽  
Positive Impact ◽  
Emerging Market ◽  
Annual Reports ◽  
Structural Power ◽  
Ceo Duality ◽  
Content Type ◽  
Corporate Reporting ◽  
Control Quality

PurposeThe authors examine the association between internal control quality (ICQ) and voluntary disclosure and test whether chief executive officer (CEO) duality, as a proxy for CEO structural power, moderates such a relationship in an emerging market (Egypt).Design/methodology/approachICQ is measured using a survey of external auditors, while a content analysis approach is used to measure the level of voluntary disclosure in annual reports.FindingsBased on a sample of 512 firm-year observations over the period of 2007–2014, the authors document that ICQ is positively and significantly associated with voluntary disclosure, suggesting that better controls improve corporate reporting policy. In addition, CEO duality moderates the association between ICQ and voluntary disclosure since this positive relationship association becomes insignificant for companies characterised by CEO duality. These results remain stable after controlling for endogeneity (self-selection problem), political instability and industry characteristics.Research limitations/implicationsThe findings of the study provide preliminary evidence on the association between ICQ and voluntary disclosure, and how CEO structural power may affect this association. Future empirical investigations may extend this work to cover the relationship between ICQ and other attributes of corporate transparency including earnings quality and accounting conservatism.Practical implicationsThe findings highlight the need for Egyptian regulators to enact new rules obliging firms to communicate information about ICQ or charging auditors to report information about firm's ICQ in their reports. The results also alert policymakers about the adverse effect of combined leadership structure (CEO duality) since it mitigates the positive impact of ICQ on voluntary disclosure.Originality/valueThe authors contribute to internal control literature by exploring the association between ICQ and voluntary disclosure on an emergent unregulated market with respect to internal control disclosure. They also highlight how CEO duality, as a proxy for CEO power, mitigates the beneficial effect of ICQ on corporate reporting policy on the Egyptian stock exchange (EGX).

Enhancing performance by disclosing more: some evidence from Japanese companies

2018 ◽  
Vol 30 (1) ◽  
pp. 110-128 ◽  
Author(s):  
Sriyalatha Kumarasinghe ◽  
Mitchell Will ◽  
Yasuo Hoshino
Keyword(s):  
Dual Language ◽  
English Language ◽  
Value Relevance ◽  
Market Performance ◽  
Annual Reports ◽  
Global Reporting Initiative ◽  
Long Term Effects ◽  
High Tendency ◽  
Content Type ◽  
Japanese Companies

Purpose The purpose of this study is to investigate the value relevance of corporate social responsibility disclosures (CSRDs) in English language annual reports in Japanese companies. Based on the stakeholder theory framework, the long-term effects of CSRD on financial and market performance are examined. There is relatively little research dealing with actual CSR reporting in Japanese companies. Design/methodology/approach Using modified versions of those given by Ohlson (1995) and Ruf et al. (2001), six dimensions of CSRD based on the Global Reporting Initiative (GRI) guidelines and three different measures of performance data are used to examine the relationship between CSRDs and performance in 101 dual-language-reporting Japanese firms. Findings The paper finds that the more a company discloses CSR on labour, human rights and product safety and health in the company’s annual report, the more it is rewarded with a higher level of financial and market performance. Originality/value To the best of the authors’ knowledge, this is the first paper to provide evidence of the incremental value of GRI-based CSRD to both financial and market performance in companies with dual-language reporting in Japan, a country with a high tendency to follow the Western practice of CSRD.

The value relevance of intellectual capital disclosure: empirical evidence from Kuwait

2017 ◽  
Vol 25 (1) ◽  
pp. 22-38 ◽  
Author(s):  
Mishari M. Alfraih
Keyword(s):  
Empirical Evidence ◽  
Financial Reporting ◽  
Intellectual Capital ◽  
Value Relevance ◽  
Practical Implication ◽  
Listed Companies ◽  
Annual Reports ◽  
Equity Valuation ◽  
Content Type ◽  
Market Participants

Purpose Drawing on market efficiency theory and studies on intellectual capital (IC) disclosure, this study aims to examine if IC information provided in the corporate annual reports of Kuwait Stock Exchange (KSE) listed companies in 2013 is value-relevant. Design/methodology/approach The analysis is divided into two parts. First, the level of intellectual capital disclosure (ICD) of KSE-listed companies is examined using the content analysis method. Second, the value relevance of financial reporting is examined empirically using Ohlson’s (1995) valuation model. Findings The results reveal that ICD is positively and significantly associated with market value, suggesting that greater ICD is valued by KSE market participants, who incorporate it into their valuation models. Practical implications Given the importance of ICD in enhancing equity valuation, a practical implication of this study is to make managers aware of its positive and significant effect on equity valuation, which may encourage companies to increase their level of disclosure. Originality/value This is the first study of the association between the level of ICD and the value relevance of financial reporting for market participants in Kuwait. It therefore extends and confirms the prior literature by broadening its scope to include frontier markets. Furthermore, it provides empirical evidence in support of recent calls from regulators and professional bodies for information that supplements and complements traditional financial reporting.

Mandatory and voluntary information disclosure and the effects on financial analysts

2015 ◽  
Vol 9 (3) ◽  
pp. 425-440 ◽  
Author(s):  
Shengnian Wang ◽  
Liang Han ◽  
Weiting Gao
Keyword(s):  
Information Disclosure ◽  
Fixed Effects ◽  
Panel Data Analysis ◽  
Empirical Evaluation ◽  
Financial Analysts ◽  
Earnings Forecasts ◽  
Content Type ◽  
Public Firms ◽  
Earnings Surprise ◽  
Ex Post

Purpose – This paper aims to make a comparison, different from existing literature solely focusing on voluntary earnings forecasts and ex post earnings surprise, between the effects of mandatory earnings surprise warnings and voluntary information disclosure issued by management teams on financial analysts in terms of the number of followings and the accuracy of earnings forecasts. Design/methodology/approach – This paper uses panel data analysis with fixed effects on data collected from Chinese public firms between 2006 and 2010. It uses an exogenous regulation enforcement to minimise the endogeneity problem. Findings – This paper finds that financial analysts are less likely to follow firms which mandatorily issue earnings surprise warnings ex ante than those voluntarily issue earnings forecasts. Moreover, ex post, they issue less accurate and more dispersed forecasts on former firms. The results support Brown et al.’s (2009) finding in the USA and suggest that the earnings surprise warnings affect information asymmetries. Practical implications – This paper justifies the mandatory earnings surprise warnings policy issued by Chinese Securities Regulatory Commission in 2006. Originality/value – Mandatory earnings surprise is a unique practical regulation for publicly listed firms in China. This paper, for the first time, provides empirical evaluation on the effectiveness of a mandatory information disclosure policy in China. Consistent with existing literature on information disclosure by public firms in other countries, this paper finds that, in China, voluntary information disclosure captures more private information than mandatory information disclosure on corporate earnings ability.

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