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.

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.

Readability of sustainability reports: evidence from Indonesia

2020 ◽  
Vol 10 (4) ◽  
pp. 621-636
Author(s):  
Desi Adhariani ◽  
Elda du Toit
Keyword(s):  
Financial Services ◽  
English Language ◽  
Emerging Market ◽  
Annual Reports ◽  
Public Companies ◽  
Content Type ◽  
Software Application ◽  
Flesch Reading Ease ◽  
Sustainability Reports ◽  
Market Capitalisation

PurposeThis study aimed at investigating the readability of sustainability reports in Indonesia. The Indonesian government, through the Financial Services Authority of Indonesia (Otoritas Jasa Keuangan [OJK]), has issued regulation POJK 51/2017 concerning the implementation of sustainable finance, which requires public companies to prepare sustainability reports—either stand-alone reports or parts of annual reports. Until 2017, only 30% of the top public companies in terms of market capitalisation issued the required report. Companies' decisions to provide the report stem from the greater visibility and access to resources that flow from additional narratives. However, the usefulness of such a report can be questioned.Design/methodology/approachWe used several linguistic techniques (Flesch Reading Ease [FRE], Flesch–Kincaid, and Gunning Fog measures) to evaluate the readability of sustainability reports. The analysis was performed using a software application called “Readability Studio 2015.”FindingsWe found the reports to have a low level of readability. This means that the information provided in the disclosures are very difficult to decipher and understand by the targeted users. Considering the similar levels of report readability in companies across industries, we observe a pattern of isomorphism in the way companies have implemented the same format and language construct in disclosing their sustainability information. They might apply the myth that complex language attracts investors or impresses others.Research limitations/implicationsThe techniques to measure readability that we use might not capture the whole dimensions of readability and understandability, especially in the non-English language.Practical implicationsThe results from this study can be used as evaluation tools for companies and regulators in preparing more intelligible and readable sustainability reports, as mandated by POJK 51/2017.Social implicationsSustainability reports act as a medium of accountability for a company's sustainable production and operations. Their usefulness for investors and other users often depends on the readability of the information.Originality/valueThe readability of sustainability reports in the context of Indonesia as an emerging market has not been comprehensively investigated in previous research. This study is among the first of its kind to support the quality enhancement of the reports.

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.

CSR and sustainability reporting practices in India: an in-depth content analysis of top-listed companies

2019 ◽  
Vol 15 (8) ◽  
pp. 1033-1053 ◽  
Author(s):  
Priyanka Aggarwal ◽  
Ajay Kumar Singh
Keyword(s):  
Content Analysis ◽  
Firm Size ◽  
Ownership Structure ◽  
Sustainability Reporting ◽  
Listed Companies ◽  
Annual Reports ◽  
Global Reporting Initiative ◽  
Content Type ◽  
Reporting Practices ◽  
Industry Type

Purpose The purpose of this paper is to comprehensively analyze the corporate social responsibility (CSR) and sustainability reporting (SR) practices of Indian companies in terms of disclosure quantity and quality, and to investigate the differences in SR practices by SR dimension, industry, ownership structure, firm size and profitability. Design/methodology/approach Data are collected from annual reports/business responsibility reports (BRR)/CSR/sustainability reports of 60 top-listed companies in India. A comprehensive sustainability reporting index is developed. Content analysis technique is used. Inter-coder reliability is established. Findings Altogether, 18 items of the index are not disclosed by the majority of companies in India. SR quality is found significantly lower than the SR quantity. Moreover, SR practices significantly differ by dimension/category, industry-type and firm-size but are not influenced by ownership structure. However, the study fails to establish any conclusive relationship between SR and profitability. Practical implications The present study has several implications for corporates, practitioners, policymakers and stakeholders. The findings underscore the need for amendments in the Global Reporting Initiative guidelines and BRR framework of the Securities and Exchange Board of India to avoid patchy disclosures and ensure complete reporting by companies. Originality/value This study is among the foremost studies in India evaluating SR practices of top-listed companies in the wake of the mandatory BRR requirement from a quantitative as well as qualitative perspective using a multidimensional index.

Intellectual capital reporting and mandatory adoption of post-IFRS – An empirical analysis using computational linguistic tools

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ankur Kulshrestha ◽  
Archana Patro
Keyword(s):  
Information Retrieval ◽  
Computational Linguistics ◽  
Intellectual Capital ◽  
Value Relevance ◽  
Annual Reports ◽  
Term Weighting ◽  
Weighting Schemes ◽  
Content Type ◽  
Mandatory Adoption ◽  
The Impact

PurposeThe study aims to report empirical evidence on the impact of mandatory adoption of International Financial Reporting Standards (IFRS) in India on the voluntary intellectual capital reporting (ICR) and its value relevance. The study also tests the effect of term-weighting schemes used for information retrieval studies in the domain area of ICR.Design/methodology/approachThe study uses computational linguistics tools to measure ICR by Indian firms in the period 2014–2019. The study developed term frequencies for 23 ICR attributes using bag-of-words methodology from the annual reports. The word counts were used to construct two distinct measures of ICR, quantity and quality, deploying different term-weighting schemes, equal weighting and the term frequency-inverted document frequency (TF-IDF) weighting, respectively. A combination of parametric and non-parametric tests has been employed to examine the different hypothesis.FindingsThe quantity of ICR was found to have increased post-IFRS adoption. However, the quality of ICR had fallen significantly, which resulted in the loss of value relevance of ICR. Firms making higher disclosures but of inferior quality experienced suboptimal market returns. Variation in inter-firm ICR has reduced. Size effect and sector effect continue but have attenuated. The study acknowledges the enormous impact of term-weighting schemes, used for information retrieval studies, in the domain area of ICR.Practical implicationsThe study strongly adds to the momentum in favour of a formal ICR standard to improve its quality, restore its value relevance and facilitate more effective decision-making where the valuation of a firm is a critical input. The study presages the firms not to make poor-quality disclosures to avoid suboptimal stock performance.Originality/valueThe study sheds light on the impact of the adoption of post-IFRS on ICR in India. The study establishes the effect of term-weighting schemes, used for linguistic studies, in the domain area of ICR and adds to the literature by explaining one of the critical reasons for the dichotomy in ICR trends.

scholarly journals The extent of segmental reporting and its value relevance: cross-country evidence

2018 ◽  
Vol 8 (2) ◽  
pp. 279-299 ◽  
Author(s):  
Ghassan H. Mardini ◽  
Yasean A. Tahat ◽  
David M. Power
Keyword(s):  
Financial Reporting ◽  
Value Relevance ◽  
Annual Reports ◽  
Reporting Standard ◽  
International Financial Reporting Standard ◽  
Equity Prices ◽  
Policy Makers ◽  
Content Type ◽  
Share Prices ◽  
Ifrs 8

Purpose The purpose of this paper is to examine the extent of segmental reporting disclosure and its value relevance to a sample of Qatari and Jordanian listed companies following the implementation review of the International Financial Reporting Standard (IFRS) 8. This was the first standard to be subjected to a post-implementation review. Annual reports are initially analyzed to investigate the level of segmental information that was published by companies in these two countries. Design/methodology/approach Using the Ohlson (1995) model, the study employs regression analysis to test the hypotheses relating to the value relevance of the segmental disclosures uncovered. In addition, one-way ANOVA and Kruskal-Wallis tests are used to investigate any variation in segmental reporting among sectors. Findings The findings indicate that the amount of segmental information disclosed by the sample firms differs across sectors. Moreover, the segmental information provided (including the number of segments and the amounts of disclosure) is value relevant and can explain the variations in firms’ share prices. Practical implications The results of the current investigation have implications for policy makers, including the International Accounting Standards Board, as well as for accounting regulators in Jordan and Qatar. They suggest that the segmental disclosures supplied under IFRS 8 are value relevant for equity prices in a developing country context. Compliance with IFRS 8 should thus be monitored to ensure that all firms provide the segmental disclosures that they are meant to supply under the terms of the standard. Originality/value This paper is one of the few to provide empirical evidence on the role of segmental reporting following the post-implementation review that was conducted for IFRS 8.

Are CSR disclosures relevant for investors? Empirical evidence from Germany

2016 ◽  
Vol 54 (6) ◽  
pp. 1359-1382 ◽  
Author(s):  
Frank H.M. Verbeeten ◽  
Ramin Gamerschlag ◽  
Klaus Möller
Keyword(s):  
Capital Market ◽  
Firm Value ◽  
Institutional Environment ◽  
Value Relevance ◽  
Social Performance ◽  
Global Reporting Initiative ◽  
Content Type ◽  
Market Effects ◽  
Environmental Disclosures ◽  
Corporate Social

Purpose – The purpose of this paper is to examine whether narrative corporate social responsibility (CSR) disclosures (the provision of textual information on companies’ environmental and social performance to external stakeholders) are associated with firm value in Germany. Design/methodology/approach – Based on the global reporting initiative guidelines, the paper uses content analysis to assess the value relevance of CSR disclosures of 130 German companies over four years. Findings – The results show that CSR information is value-relevant, but the value relevance of CSR information differs among CSR categories. Specifically, the disclosure of social information is positively associated with firm value yet environmental disclosures are not. Practical implications – The results confirm that management should be aware of the potential capital market effects of voluntary CSR disclosures, even though such disclosures may be directed at other stakeholders. Originality/value – Germany is an interesting setting as CSR disclosures are voluntarily, even though the institutional environment appears sensitive to CSR disclosures. Despite this, little research has focussed upon the value-relevance of CSR-disclosures in Germany. In addition, the results confirm that management should be aware of the potential capital market effects of voluntary CSR disclosures, even though they are not directed at shareholders as such.

scholarly journals Impaired translations: IFRS from English and annual reports into English

2018 ◽  
Vol 31 (7) ◽  
pp. 1981-2005 ◽  
Author(s):  
Christopher Nobes ◽  
Christian Stadler
Keyword(s):  
Financial Reporting ◽  
English Language ◽  
Annual Reports ◽  
Content Type ◽  
Listed Firms ◽  
Financial Reporting Standards ◽  
Wide Range ◽  
English Translations ◽  
Core Section ◽  
One Year

Purpose The purpose of this paper is to examine translation in the context of International Financial Reporting Standards (IFRS) by taking the example of the English term “impairment” in IAS 36, and following it into 19 translations. The paper then examines the terms used for impairment in English translations of annual reports provided by firms. Consideration is given to the best approach for translating regulations and whether that is also suitable for the translation of annual reports. Design/methodology/approach The two empirical parts of the paper involve: first, identifying the terms for impairment used in 19 official translations of IAS 36, and second, examining English-language translations of reports provided by 393 listed firms from 11 major countries. Findings Nearly all the terms used for “impairment” in translations of IAS 36 do not convey the message of damage to assets. In annual reports translated into English, many terms are misleading in that they do not mention impairment, peaking at 39 per cent in German and Italian reports in one year. Research limitations/implications Researchers should note that the information related to impairment in international databases is likely to contain errors, and the authors recommend that data should be hand-collected and then carefully checked by experts. The authors make suggestions for further research. Practical implications Translators of regulations should aim to convey the messages of the source documents, but translators of annual reports should not look only at the reports but also consult the terminology in the original regulations. The authors also suggest implications for regulators and analysts. Originality/value The paper innovates by separately considering regulations and annual reports. The authors examine a key accounting term systematically into a wide range of official translations. The core section of the paper is a new field of research: an empirical study of the translations of firms’ financial statements.

Real earnings management in Thailand: CEO duality and serviced early years

2019 ◽  
Vol 11 (1) ◽  
pp. 88-108
Author(s):  
Sirada Nuanpradit
Keyword(s):  
Earnings Management ◽  
Stock Exchange ◽  
Chief Executive ◽  
Early Years ◽  
Real Earnings Management ◽  
Annual Reports ◽  
High Tendency ◽  
Ceo Duality ◽  
Content Type ◽  
The Individual

Purpose The purpose of this paper is to investigate the individual and interaction effects of chief executive officers (CEO)-chairman leadership structure (CEO duality) and CEO-serviced early years (the first three years in office) on real earnings management (REM) through sales activities of listed firms in the Stock Exchange of Thailand (SET). Design/methodology/approach The longitudinal data on CEO and chairman names of 3,825 firm-year observations were manually gleaned from the SET market analysis and reporting tool and the annual reports from 2001 to 2015. Multiple regressions were utilized to analyze the effects. Findings The findings show a positive relationship between CEO duality and sales-driven REM. However, the CEO-serviced early years have no association with sales-driven REM. The CEO duality/serviced early year interaction effect is positively correlated to sales manipulation. In addition, firms with the CEO duality engage in upward or downward sales-driven REM, while firms with newly appointed CEO adopt only the upward sales-driven REM. In firms which their newly appointed CEO concurrently serves as chairman, either upward or downward sales-driven REM strategy is introduced. Practical implications The findings provide some grounds for capital market and regulators to exercise caution when it comes to firms with the newly appointed CEO and/or the CEO duality, given a high tendency to manipulate sales revenues. Originality/value This study is the first to investigate the relationship between the CEO duality/serviced early years on sales-driven REM. The findings are expected to complement existing publications on REM.

The state of disclosures on stakeholder engagement in sustainability reporting in Australian local councils

2014 ◽  
Vol 26 (1/2) ◽  
pp. 54-74 ◽  
Author(s):  
Amanpreet Kaur ◽  
Sumit K. Lodhia
Keyword(s):  
Stakeholder Engagement ◽  
Sustainability Reporting ◽  
The State ◽  
International Standards ◽  
Annual Reports ◽  
Global Reporting Initiative ◽  
Content Type ◽  
Key Stakeholders ◽  
Engagement Process ◽  
Sustainability Reports

Purpose – This study aims to examine the state and extent of disclosures on stakeholder engagement in sustainability reporting in Australian local councils. Design/methodology/approach – Content analysis was used to analyse 23 sustainability/state of environment/annual reports out of a total of 563 local councils (city, shire, district, borough and regional) in Australia for the year 2009-2010 – those found to be using stakeholder engagement in the development of sustainability reports. A stakeholder engagement index was developed on the basis of the literature review to examine the extent of disclosures on stakeholder engagement. Findings – This study identifies: the Australian local councils that are engaging with their stakeholders in the development of sustainability reports; key stakeholders for sustainability reports; extent of engagement; media and approaches used for engagement; and difficulties in the engagement process. The results suggest that stakeholder engagement is an essential component in the development of sustainability reporting as it informs reporters of material concerns, issues and aspirations of key stakeholders. Research limitations/implications – The focus of this paper is the state of disclosures on stakeholder engagement in sustainability reporting. The findings of the paper are limited to only one level of governance of the public sector, that is, local councils. Originality/value – International standards such as Global Reporting Initiative and AccountAbility (AA) 1000 have signified the role of stakeholder engagement in the development of sustainability reports. However, there has been a little research that demonstrates whether or not organisations engage with their stakeholders for reporting purposes. This paper provides evidence of stakeholder engagement in sustainability reporting in Australian local councils.

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