Pandemic risk disclosure in integrated reports: after COVID-19 is hindsight 2020?

We examine whether, and to what extent companies disclosed pandemic risk and likely impact as part of their key risks or material matters immediately prior to 2020. The integrated/annual reports of 489 companies from six global regions were examined, finding that despite clear warnings from multiple fronts that highlighted the inevitability and imminence of a global pandemic, only 15.5 percent of companies disclosed anything related to pandemic risk. Of these, 71.1 percent were boilerplate in nature, providing minimal useful information to stakeholders. This study contributes to our understanding of integrated reporting, specifically regarding the adequacy of the disclosure of material risks.     

沪市公司年报对公司实际控制人的披露情况分析

绝大部分沪市上市公司均按规定在2008年报中对实际控制人的情况进行了披露,但也有一些上市公司未按或未完全按年报准则关于实际控制人的披露要求履行披露义务,无助于广大投资者了解其产权和控制关系状况。针对披露中存在的问题,我们建议:进一步明确界定实际控制人的含义、类型及其控制形式,充实和完善对实际控制人应予披露的内容,加强对法人控股股东和中间层级控制主体的披露;出台专门的实际控制人披露指引,规范披露的内容和形式;严格上市公司及其控股股东、实际控制人未按规定如实、准确、完整披露的责任。     

有效预警上市公司违规的递延所得税异动指标和人工智能模型

2000-2017年,3434家A股上市公司样本中的47.79%至少有一次违规记录,每年平均有17%的公司违规,而监管机构平均需要2.7年查证并通告违规行为。我们用当年数据构建递延所得税异动指标,可有效预判违规,并发现监管机构未能识别这一指标的警示作用,实际激励了违规公司通过操纵递延所得税提高财务指标以规避稽查。进一步构建决策树模型,对违规事件实现样本外精准判别。本文揭示了A股公司大面积违规而稽查过程冗长迟缓这一重要现象,并分析了违规机制,指出了所得税数据在稽查违规中可以发挥的预警作用,为监管者和投资者提供有效预警上市公司违规行为的新指标和方法。     

Perpetuating traditional influences: Voluntary disclosure in Malaysia following the economic crisis

Prior research on listed companies in Malaysia, Hong Kong and Singapore during and before the 1997 financial crisis has reported a significant association between ownership structure and the extent of voluntary disclosure in annual reports. We examine data for Malaysia after the 1997 financial crisis to assess whether the regulatory reaction to the crisis increased the awareness of disclosure as a tool of corporate governance and reduced the influence of insider domination on voluntary disclosure. We contrast director ownership and government ownership as determinants of voluntary disclosure in Malaysian company annual reports. Additionally, we include consideration of proprietary costs by testing whether industry competitiveness has an impact on voluntary disclosure.We find that director ownership is significantly associated with the extent of voluntary disclosure while government ownership, new governance initiatives and industry competitiveness are not significant in pointing companies towards greater transparency. We conclude that, despite the upheaval of the economic crisis, traditional influences of director ownership and family domination of the board outweigh the effect of government-backed accountability initiatives in determining the extent of voluntary disclosure.     

有效预警上市公司违规的递延所得税异动指标和人工智能模型

2000-2017年,3434家A股上市公司样本中的47.79%至少有一次违规记录,每年平均有17%的公司违规,而监管机构平均需要2.7年查证并通告违规行为。我们用当年数据构建递延所得税异动指标,可有效预判违规,并发现监管机构未能识别这一指标的警示作用,实际激励了违规公司通过操纵递延所得税提高财务指标以规避稽查。进一步构建决策树模型,对违规事件实现样本外精准判别。本文揭示了A股公司大面积违规而稽查过程冗长迟缓这一重要现象,并分析了违规机制,指出了所得税数据在稽查违规中可以发挥的预警作用,为监管者和投资者提供有效预警上市公司违规行为的新指标和方法。     

The effect of fair disclosure regulation on timeliness and informativeness of earnings announcements

This paper examines the effect of Korea’s fair disclosure regulation on the timeliness and informativeness of earnings announcements. The present regulation for Korean listed firms requires that if a company’s sales revenue, operating income (or loss) and net income (or loss) have changed by over 30% compared to the prior year, the firm must disclose this information through a preliminary financial report (PFR) even before the company is audited by external auditors. To analyze the effects of this policy, we first investigate the timeliness of preliminary financial report disclosures. We examine the extent to which Korean listed companies actually comply with the requirement for prompt notification of information concerning material changes in financial performance. Second, we investigate the informativeness of preliminary financial reports by analyzing differential stock market reactions to different timings of preliminary financial report disclosures. Our empirical results reveal that more than half of our sample firms release their preliminary financial reports after external audits are completed, thereby potentially invalidating the effectiveness of the regulation. In addition, we find that preliminary financial reports have information value only if they are disclosed prior to annual audit report dates. This finding supports the notion that timeliness increases the informativeness of preliminary financial report disclosure by curbing insiders’ ability to potentially profit from their information advantage.     

Quality of financial reporting: evidence from the listed Saudi nonfinancial companies

This study assesses the quality of information disclosed by a sample of nonfinancial Saudi companies listed on the Saudi Stock Exchange. The study also compares the extent of corporate disclosure before and after the creation of the Saudi Organization of Certified Public Accountants (SOCPA). We classify information disclosed in the annual reports into three main categories: mandatory; voluntary related to mandatory; and voluntary unrelated to mandatory disclosure. The sample provided 63% and 66% of the total population of companies listed on the Saudi Stock Exchange in the years 1992 and 1999.In departure from most previous studies conducted in this area of research, we weighted the indexes of disclosure by the mean and median responses of seven users of the annual reports in Saudi Arabia. The results of both unweighted and weighted indexes are reported. The outcome of the analysis indicated a relatively high compliance with the mandatory requirements in all industries covered by the study, with the exception of the electricity sector. As for the voluntary disclosure, whether related or unrelated to mandatory disclosure, the analysis revealed that Saudi companies disclose information more than the minimum required by law. The level of voluntary disclosure, however, is relatively low. The analysis also showed that the creation of SOCPA has had little impact on corporate reporting in Saudi Arabia.     

信息过载是否影响投资者对公开信息的使用——来自季度盈余的实证证据

首季季报之所以可能导致投资者的信息过载原因有二 :一是许多公司在同一天披露其季报 ;二是公司的年报和季报有可能同时披露。我们的结果说明了信息的集中披露本身并不妨碍投资者对信息的及时利用 ,这些发现对我国资本市场上信息披露监管机构有着直接的政策性含义。     

Do significant risk warnings in annual reports increase corporate bond credit spreads? Evidence from China

Based on listed companies issuing bonds on the Shanghai and Shenzhen Stock Exchanges from 2007 to 2017, this study analyzes the relationship between significant risk warnings in Chinese companies’ annual reports and corporate bond credit spreads. The main findings are as follows. First, in the Chinese market, “substantial warnings of significant risks” can significantly improve corporate bond credit spreads, reflecting the risk-warning effect; second, state-owned property rights weaken this effect, which only pertains to listed companies with poor risk management and low information quality; third, significant risk warnings increase investors’ heterogeneous beliefs, also affecting credit spreads; and fourth, through textual analysis, it is found that the corporate bond credit spread is greater when the disclosed risk factors are more pessimistic and less similar to those of the previous year. The findings of this paper help to enrich the literature on credit spreads and risk disclosure.     

业绩快报的信息含量:经验证据与政策含义

业绩快报是上市公司2004年报披露中的一项制度创新。本文旨在研究业绩快报是否具有信息含量,以及业绩快报的披露是否会减少盈利公告的有用性。我们选取了2005年1月至4月间披露的70份2004年度业绩快报作为样本进行了实证研究。研究结果表明:业绩快报的披露提高了会计信息质量;业绩快报具有显著信息含量;业绩快报的披露并没有减少盈利公告的信息含量,是盈利公告的一种有益补充形式,值得提倡和推广。     

Disclosure of outsourcing in the annual report: Causes and market returns effects

Firms increasingly are utilizing outsourcing to enhance or maintain their competitiveness. Prior research shows that capital markets value a firm's decision to outsource. This study uses a sample of firms announcing outsourcing arrangements in a press release to examine which factors are associated with the subsequent decision to voluntarily provide or withhold information about outsourcing in their annual report. The paper also examines whether annual report disclosure is a reliable signal of future market performance. We find that underperforming firms, larger firms, and firms experiencing negative outsourcing announcement market returns and negative long-term market returns are more likely to disclose outsourcing in their annual reports. There is also evidence that firms' disclosure of outsourcing in the annual report signals an improvement in market performance that is credible to the capital markets. We contend that the disclosure and subsequent firm performance issues we investigate apply to any type of outsourcing arrangement, and therefore our results are relevant to future information systems research on this subject. Our findings also suggest that regulatory standards could reduce private information search costs for investors by providing a common disclosure methodology for outsourcing activities.     

INTERNATIONAL DIFFERENCES IN RESEARCH AND DEVELOPMENT REPORTING PRACTICES: A FRENCH AND CANADIAN COMPARISON

This paper compares the research and development (R&D) disclosure practices in France and Canada, as evidenced in the annual reports of 76 French and 110 Canadian listed companies. It finds that Canadian high-tech companies (hardware, software, and biotechnology) disclose significantly more information on their R&D activities than their French counterparts. It also finds a strong link between R&D intensity and R&D disclosure among Canadian high-tech companies. Canadian companies overall are also found to be more likely to use non-financial disclosure as a means to resolve any R&D information asymmetry, while French firms disclose more traditional financial and accounting information. Canadian companies are also more willing than French firms to provide information concerning their future R&D expenditures. These results are consistent with inherent cultural and capital market differences between France and Canada. In contrast, the study does not find any significant difference in R&D expenditure capitalization policies between French and Canadian firms.     

Evaluation of Extraordinary and Exceptional Items Disclosed by Hong Kong Companies

This study evaluates extraordinary and exceptional items (EI) disclosed in financial statements by Hong Kong companies from 1989 to 1993, prior to revision of SSAP 2. The results indicate that disclosures of positive EI were associated with market expectations of profit before taxes. If market expectations were higher than profit before EI and taxes (PBEI), positive EI (gains) were likely to be disclosed to adjust PBEI upwards and thus reduce the gap between reported and expected profits.
The results relating to negative EI (losses) showed that if companies had low historical economic performance they were more likely to disclose negative EI. Because weak historical economic performance is likely to be associated with low market expectations, management used this opportunity to 'spring clean' in order to show better economic performance in future years.
These findings suggest that managers engage in earnings management through disclosure of extraordinary items when they have flexibility to do so. In order to improve quality of financial disclosure, better accounting standards need to be developed for disclosures of extraordinary items, especially by newly developed and developing countries where accounting standards are at the formative stage.     

Bridging the Information Gap: Quarterly Conference Calls as a Medium for Voluntary Disclosure

This paper uses the quarterly conference call as a disclosure metric to examine whether firms with less informative financial statements are more likely to respond by providing additional voluntary disclosure. After controlling for other characteristics of a firm's information environment, I find a significant inverse relation between measures of the informativeness of a firm's financial statements and the likelihood that the firm will use a quarterly conference call. This finding is consistent with the hypothesis in Verrecchia (1990) that the probability of disclosure of management's private information is negatively related to the precision of prior public information on firm value.     

Can financial statement analysis beat consensus analysts’ recommendations?

We examine whether investors can exploit financial statement information to identify companies with a greater likelihood of future earnings increases and whether stocks of those companies generate 1-year abnormal returns that exceed the abnormal returns from following analysts’ consensus recommendations. Our approach summarizes financial statement information into a “predicted earnings increase score,” which captures the likelihood of 1-year-ahead earnings increases. We find that, within our sample of consensus recommendations, stocks with high scores are much more likely to experience future earnings increases than stocks with low scores. A hedge portfolio strategy that utilizes our approach within each consensus recommendation level generates average annual abnormal returns of 10.9 percent over our 12-year sample period, after controlling for previously identified risk factors. These abnormal returns exceed those available from following analysts’ consensus recommendations. Our results show that share prices and consensus recommendations fail to impound financial statement information that helps predict future earnings changes.     

Disclosures about algorithmic decision making in the corporate reports of Western European companies

Over the last decade, the use of different artificial intelligence (AI) tools has increased. To shed some light on the emerging trend of AI disclosure, the aim of this paper is to analyse the current practices of major Western European companies regarding the automated decision-making (ADM) disclosure in their annual or sustainability reports. This paper proposes a methodology based on bigrams that enables the automatic extraction of the information on ADM that companies disclose. The sample consisted of 962 annual/sustainability reports, published in 2018 and 2019, of 337 companies listed on 13 Western European countries’ stock markets. Our findings show that ADM disclosure is still at an early stage and that the first adopters are mostly companies operating in the financial sector.     

Voluntary forward-looking statements driven by corporate governance and their value relevance

This paper examines the impact of corporate governance on the level of voluntary disclosures of forward-looking statements in the narrative sections of annual reports. It also examines whether the forward-looking statements that are driven by governance are informative about future earnings. This analysis is drawn from a large-scale sample of UK FTSE All-Share companies for financial years ending within the period January 1996–December 2007. We find that corporate governance influences companies’ decisions to voluntarily disclose these statements. The main drivers are directors’ ownership, board size, board composition, and the duality of the CEO’s role. These results suggest that better corporate governance improves reporting practice. We further find that the forward-looking statements of well governed firms improve the stock market’s ability to anticipate future earnings. Our findings have important implications for policy makers and regulators because they confirm that the effectiveness of corporate governance in the practice of disclosure is a function of certain characteristics and that the voluntary forward-looking statements of well governed firms contain value relevant information for investors.     

Private disclosure and financial reporting

This article describes how large UK companies communicate with their institutional shareholders, and investigates how this private disclosure process relates to financial reporting. The article draws from case studies based on interviews with senior executives in 33 UK companies. Four insights into corporate disclosure arise from this case data. Firstly, a private disclosure process to institutional shareholders is outlined. Secondly, the private disclosure activity is recognised as a significant part of a larger corporate decision concerning public versus private voluntary disclosure. Thirdly, a range of factors are identified as encouraging private disclosure. These include the perceived limitations of financial reports (annual reports and interims), both as a disclosure mechanism in their own right and by comparison with private disclosure channels. Finally, despite these limitations, financial reports are recognised as a central component of a larger corporate disclosure system. The article therefore provides a novel insight in the role of financial reports in the larger corporate disclosure process, and ends by exploring new directions for research in financial reporting, including how the wider corporate disclosure system can be reformed in a systematic manner.     

Disclosure Versus Recognition: Inferences from Subsequent Events

Standard setters explicitly state that disclosure should not substitute for recognition in financial reports. Consistent with this directive, prior research shows that investors find recognized values more pertinent than disclosed values. However, it remains unclear whether reporting items are recognized because they are more relevant for investing decisions, or whether requiring recognition itself prompts differing behavior on the part of firms and investors. Using the setting of subsequent events, I identify the differential effect of requiring disclosure versus recognition in a setting where the accounting treatment of an item is exogenously determined. For comparable events, I find a stronger initial market response for firms required to recognize relative to firms that must disclose, although the large magnitude of the identified effect calls into question whether this difference can be attributed to accounting treatments alone. In examining various reasons for the stronger market response to recognized values, I fail to find support for the hypothesis that this difference is due to differential reliability of disclosed and recognized values. I do find some evidence that investors underreact to disclosed events, consistent with investors incurring higher processing costs when using disclosed information.