Board structure and supplementary commentary on the primary financial statements

Purpose: This research investigates the relationship between the extent and focus of supplementary narrative commentary (SNC) on amounts reported in the primary financial statements and board structure variables. Design/Methodology/Approach: The study uses the disclosure index methodology to measure the extent of SNC in annual reports of 167 FTSE 250 companies. Ordinary Least Squares (OLS) regression analysis is employed to examine the association between the extent and focus of SNC and board structure variables. Findings: The findings show that the extent of SNC on amounts reported in the primary financial statements is about 30%, suggesting that companies provide commentary on a small number of amounts reported in the financial statements. In terms of focus of SNC, companies provide greater SNC on amounts in the income statement relative to the balance sheet. The regression results indicate that the extent of SNC is negatively associated with board size, and positively associated with audit committee independence and financial expertise. Focus of SNC is negatively related to audit committee independence and finance expertise. Originality/Value: The research contributes to both the voluntary disclosure and impression management literature streams. The findings provide evidence of the extent and focus of SNC on amounts in the financial statements. They also demonstrate that board structure variables are related to the extent and focus of SNC on amounts in primary financial statements. These findings have implications for policy makers who have responsibilities for ensuring that users of annual reports receive adequate information to make decisions

Capital market pressures and the format of intellectual capital disclosure in intellectual capital intensive firms

Purpose - A number of studies have examined firms’ intellectual capital (IC) disclosure practices. However, the presentation format of IC disclosure (text, numerical and graphs/pictures) is yet to be examined. In addition, there is little evidence on the impact of capital market pressures on IC disclosure. This study aims to examine the relation between presentation format of IC disclosures and three market factors (market-to-book ratio, share price volatility and multiple listing. Design/methodology/approach - Using content analysis, we examine the level of IC disclosure provided in the annual reports of 100 IC-intensive listed UK firms. A 61-IC-item research instrument is used to measure IC disclosure and regression analysis is employed to examine the relation between disclosure and the market factors, controlling for corporate governance and firm specific variables. Findings - Text is the most commonly used format for IC disclosure, whilst the use of graphs/pictures is very low. The findings of the relation between market factors and IC disclosure are mixed. Market-to-book ratio is significantly related to disclosure in text and numerical, but not to graphs/pictures. Share price volatility is only associated with graphs/pictures, whilst multiple listing is only related to text. Originality/value - Our findings suggest that the impact of capital market pressures on IC disclosure might differ with presentation format. In this context, the study makes a significant contribution to the IC disclosure literature

Complimentary Narrative Commentaries of Statutory Accounts in the Annual Reports of UK Listed Companies

This paper, for the first time, classifies narrative information into complementary and supplementary. For the purpose of the paper, complementary narrative information is defined as that information which refers to specific numbers presented in the statutory accounts (profit and loss and balance sheet). Non-specific narrative information is classified as supplementary. Having made the distinction and provided reasons for such a distinction the study investigates the extent of complementary narrative commentaries on numbers from the statutory accounts. The study also investigates which company-specific characteristics are associated with the extent of complementary narrative commentaries. An index consisting of 46 items which must be reported in the statutory accounts was used to measure the extent of complementary narrative commentaries in the annual reports of 170 listed UK companies. the findings suggest that, on average, the companies comment on 3909% of the numbers appearing in their statutory accounts. using the Ordinary Least Squares (OLS) regression model, the results indicate that company size, gearing, profitability, liquidity ratio, the presence of exceptional items, and substantial institutional investment are significantly associated with the extent of complementary narrative commentaries. However, auditory type, directors' share ownership, and the proportion of non-executive directors are not significantly associated with the extent of complementary narrative commentaries. The research has important implications for accounting regulators, users of annual reports and future research into the usefulness narrative information provided in annual reports

Controlling for Sustainability Strategies: Findings from Research and Directions for the Future

Over the past decade the focus of sustainability researchers has broadened to explore management controls for sustainable business practice. This paper contributes to the emerging area of interest on understanding the roles management controls play by presenting a review of the literature that specifically focuses on the relationship between management controls and sustainability strategies. The paper shows that the current literature predominantly focuses on exploring controls from a management control design perspective, mostly informed through the case study based approach while concentrating primarily on large firms. Nine key themes arising out of the review of the literature are presented. The limitations of current research are subsequently addressed and avenues for further research are presented and discussed

Company specific determinants of greenhouse gases disclosures

Findings - The results indicate that company size, gearing, financial slack and two industries (consumer services and industrials) are significantly associated with GHG disclosures while profitability, liquidity and capital expenditure are not. When the authors disaggregate GHG disclosures into qualitative and quantitative, the results suggest that the effect of some company factors differ depending on the type of GHG disclosures

Reinforcing users’ confidence in statutory audit during a post-crisis period : An empirical study

Purpose – The purpose of this paper is to examine the factors that are perceived as important for the statutory audit function to restore confidence in the financial statements, its value relevance and decision usefulness in the aftermath of the financial crisis. Design/methodology/approach – This research used a structured questionnaire to collect data from practising accountants, auditors and accounting academics within the UK. A factor analysis was undertaken to examine the potential inter-correlations that could exist between different factors obtained from the literature. The analysis reduced these variables into the more important factors which were subsequently modelled in a logistic regression analysis. Findings – The paper identified, as critical factors for enhancing statutory audits, “a continuously updated accounting curriculum”, “expansion of the auditor's role”, “frequent meetings between regulators and auditors”, “mandatory rotation of auditors”, “limiting the provision of non-audit services”, “knowledge requirements from disciplines other than accounting” and “encouraging joint audits”. It is hoped that addressing these issues might improve confidence in the audit profession, thereby reinforcing its value relevance. Research limitations/implications – The study's findings imply that professional accountancy bodies, accounting educators and accounting firms will need to incorporate the key factors identified in this study into their curriculum and training schemes. However, the generalisability of these findings might be limited as the research data were primarily obtained from UK accountants alone. Originality/value – This study extends the frontiers of knowledge on critical factors that could reinforce users’ confidence in the statutory audit function and have implications for policy and practice.N/

Bank power, block ownership, boards and financial distress likelihood: An investigation of Spanish listed firms

We investigate the effects of bank power, block ownership and board independence on the likelihood of financial distress. Using a matched sample design, we find that firms in which banks have power are more likely than their counterparts to enter financial distress. However, the bank power effects are moderated by block ownership and board independence. Specifically, on the one hand, financial distress due to bank power is lower for firms with greater ownership by pressure resistant blockholders and such blockholders appear to be the largest blockholder in the firm. The bank power effects are also lower in firms with greater outside directors and this appears to be primarily driven by proprietary directors than independent directors. On the other, we document evidence suggesting that the bank power effects are magnified for firms in which the board chair is a proprietary director aligned to non-financial blockholders or CEO/Chair, suggesting that banks might partly influence decisions via board chairs. Overall, the findings are consistent with bank power actions being detrimental to the firm, but the extent to which such actions harm the firm depends on the monitoring intentions of blockholders and/or board of directors. These findings have important implications for policymakers