Impression management: dual language reporting and voluntary disclosure

The presentation of corporate disclosure may be explained by impression management. The relative extent of corporate disclosure may be related to information costs. This paper links these two theoretical perspectives by comparing the extent of voluntary disclosure in companies that have chosen to present a dual language approach to reporting, relative to the disclosure provided by companies choosing to report only in one language. The analysis shows that voluntary disclosure is higher in companies that have higher visibility through dual language reporting and whose investors face higher information costs. The analysis also shows that voluntary disclosure by companies reporting only in one language is associated with domestic visibility in market listing and type of industry, while that of companies reporting in two languages is associated with responding to market pressures.     

Making sense and transparency in finance literature: Evidence from trends in readability

Transparency continues to interest finance scholarship, as regards not just to financial reporting, but to a host of areas. Concomitantly, there is a growing emphasis on the transparency of the finance research process, with journals initiating requirements for uploading data and codes. However, little consideration is given to the transparency of finance scholarly texts, despite new emphasis by academic institutions and accreditation bodies on articles having an impact on practitioners. We use textual analysis to investigate the readability of articles in a selection of finance journals. Results evidence that academic articles are becoming less readable. Whether readability straightforwardly implies transparency is unclear, still, we consider these issues alongside our findings. Our study should be of great interest to those concerned with the state of finance scholarship.     

Greenwashing in environmental,social and governance disclosures

The environmental, social, and governance (ESG) data provided in firms’ sustainability reports is often unaudited. If ESG information disclosed by firms is not reliable, a firm’s greenwashing behavior can be a barrier to integrating ESG factors into investment decisions. In this paper, we study mechanisms to lessen firms’ greenwashing behavior in ESG dimensions holistically. Firstly, we identify “greenwashers” as firms which seem very transparent and reveal large quantities of ESG data but perform poorly in ESG aspects. By creating peer-relative greenwashing scores for a cross-country dataset comprised by 1925 large-cap firms, we measure the extent to which large-cap firms engage in greenwashing. We find evidence that greenwashing behavior in ESG dimensions can be deterred by scrutiny from (a) independent directors, (b) institutional investors, (c) influential public interests via a less corrupted country system, and (d) being cross-listed. Our results suggest that the two firm-level governance factors are most effective at attenuating firms’ misleading disclosure relating to ESG dimensions.     

Environmental,social and governance reporting in annual reports: A textual analysis

Considering environmental, social, and governance (ESG) factors becomes increasingly important for companies and investors. However, “ESG” is not clearly defined so far and, therefore, it is difficult to measure the ESG activity of companies. We analyze the extent and changes in 10‐K reports and proxy statements on ESG, using a textual analysis and creating an ESG dictionary. The results show an average of 4.0 % ESG words on total words in the reports. The ESG word list with 482 items can be used to quantitatively examine the extent of ESG reporting, which will be helpful especially for SRI investors. Our classification of 40 subcategories allows a highly granular analysis of different ESG related aspects. Moreover, indications for a relation between changes in reporting and real events, especially negative media presence, are detected. Regulatory bodies have to be aware of the use of such words and how they are used.     

Causal language intensity in performance commentary and financial analyst behaviour

We use automated techniques to measure causal reasoning on earnings‐related financial outcomes of a large sample of MD&A sections of US firms and examine the intensity of causal language in that context against extent of analyst following and against properties of analysts’ earnings forecasts. We find a positive and significant association between a firm's causal reasoning intensity and analyst following and analyst earnings forecast accuracy respectively. Correspondingly, analysts’ earnings forecast dispersion is negatively and significantly associated with causal reasoning intensity. These results suggest that causal reasoning intensity provides incremental information about the relationship between financial performance outcomes and its causes, thereby reducing financial analysts’ information processing and interpreting costs and lowering overall analyst information uncertainty. Additionally, we find that decreases in analyst following are followed by more causal reasoning on performance disclosure. We also find that firms with a considerable increase of causal disclosure especially attract new analysts who already cover many firms. Overall, our evidence of the relationship between causal reasoning intensity and properties of analyst behaviour is consistent with the proposition that causal reasoning is a generic narrative disclosure quality characteristic, able to provide incremental information to analysts and guide analysts' behaviour.     

Voluntary disclosure,greenhouse gas emissions and business performance: Assessing the first decade of reporting

This study explores the empirical relationships between GHG emissions and an extensive range of business performance measures for UK FTSE-350 listed firms over the first decade or so of such reporting. Despite the popular and policy generated environmental imperatives over this period—along with growing evidence of the corporate added-value of having an ‘environmental conscience’, voluntary disclosure of emissions has been slow to adopt by firms. The leading contribution is to present clear evidence of a non-linear relationship, initially increasing with firm performance and then decreasing. An extensive pattern of non-reporting of emissions is also observed over time, and prior literature has introduced questions of endogeneity existing between firm performance and emissions. Steps are taken to ensure confidence/robustness of the results to these concerns. Accordingly, a two-stage (Heckman-type) selection model is used to analyse the emissions-performance nexus conditional upon the firm choosing to report (i.e. treating the choice to report as being endogenously determined with firm performance). From this—in addition to confirming the robustness of the non-linear relationship—it can be observed that the decision to report emissions is not directly influenced by wider social/governance disclosure attitudes of a firm, thus suggesting that firms disassociate environmental responsibility from social responsibility.     

Enterprise large language models: Knowledge characteristics,risks, and organizational activities

Since the release of OpenAI's ChatGPT, there has been substantial interest in and concern about generative AI systems. This paper investigates some of the characteristics, risks, and limitations with the enterprise use of enterprise large language models. In so doing, we study the organizational impact, continuing a long line of research on that topic. This paper examines the impact on expertise, the organizational implications of multiple correlated but different responses to the same query, the potential concerns associated with sensitive information and intellectual property, and some applications that likely would not be appropriate for large language models. We also investigate the possibility of agents potentially manipulating the content in these large language models for their own benefit. Finally, we investigate the emerging phenomenon of “ChatBot Enterprise” versions, including some of the implications and concerns of such enterprise large language models.     

Accounting narratives and the narrative turn in accounting research: Issues,theory, methodology,methods and a research framework

This plenary address paper traces the development of accounting narratives in external reporting practice and research, focussing on corporate-sourced financial communications to shareholders and analysts. It is written from the personal perspective of a researcher who began in the positivist tradition of disclosure research and is increasingly engaging with the more interpretive/critical tradition of socially-constructed narratives. Whereas early accounting narratives research existed at the margins, modern content-analytic work on disclosures rose to a position of prominence, alongside the rise of non-financial information in the practice domain. In recent years, large-scale linguistic studies have entered the mainstream positivist North American literature, supported by computerised natural language processing. Outside this community, accounting research has witnessed a ‘narrative turn’, similar to many other social science disciplines, marking a shift away from realism and positivism. This paper argues for the importance of both lines of research. Participants' actions in relation to accounting narratives may be understood in terms of, inter alia, both economic explanations based on utility maximisation and behavioural explanations based on psychology and the embeddedness of narrative in social practice. In terms of methodology and methods, the weakening of the deep-surface divide is exemplified by the common combination of corpus linguistics approaches with (critical) discourse analysis in other disciplines. Based on a discussion of key issues, theory, methodology and methods, a framework for thinking about research in accounting narratives is offered. The challenge is to better understand the role of narratives in the increasingly rich, complex information environment of external reporting.     

The effects of environmental,social and governance disclosures and performance on firm value: A review of the literature in accounting and finance

This paper not only attempts to survey the burgeoning literature on environmental, social and governance disclosures and performance and their effects on firm value, but its focus also lies on highlighting stylised observations coming from the most recent work that has not yet become part of the ‘conventional wisdom’ in the field. In addition, it outlines some of the crucial knowledge gaps and interesting questions that have not, as of yet, been addressed and thus outlines a potential agenda for future research on socially responsible investing. Lastly, it introduces the papers published in this special issue of the British Accounting Review.     

Differences in strategy, quality management practices and performance reporting systems between ISO accredited and non-ISO accredited companies

In recent years, an increasing number of organizations are obtaining accreditation offered by the International Organization for Standardization (ISO). Although ISO accreditation may reflect an organization's pursuit of a quality-focused business strategy and a commitment to quality management practices, ISO accreditation may merely be a response to external (customers') demands for quality certification. This study investigates whether ISO accredited companies differ from non-ISO accredited companies in business strategy and in their implementation of quality management practices. It also investigates differences between ISO accredited and non-ISO accredited companies in their reporting of quality in physical and financial terms and traditional performance measures. Based on a mail questionnaire sent to a sample of ISO and non-ISO accredited New Zealand manufacturing companies, the results showed a significant difference in the business strategy pursued by the two groups, with ISO accredited companies regarding quality as more important than cost efficiencies. However, there was no significant difference in the quality management practices of ISO accredited and non-ISO accredited companies, except in the areas of process improvement and quality measurement. There was also little evidence of differences in performance reporting systems between ISO accredited and non-ISO accredited companies.     

Retrieving,classifying and analysing narrative commentary in unstructured (glossy) annual reports published as PDF files

We provide a methodological contribution by developing, describing and evaluating a method for automatically retrieving and analysing text from digital PDF annual report files published by firms listed on the London Stock Exchange (LSE). The retrieval method retains information on document structure, enabling clear delineation between narrative and financial statement components of reports, and between individual sections within the narratives component. Retrieval accuracy exceeds 95% for manual validations using a random sample of 586 reports. Large-sample statistical validations using a comprehensive sample of reports published by non-financial LSE firms confirm that report length, narrative tone and (to a lesser degree) readability vary predictably with economic and regulatory factors. We demonstrate how the method is adaptable to non-English language documents and different regulatory regimes using a case study of Portuguese reports. We use the procedure to construct new research resources including corpora for commonly occurring annual report sections and a dataset of text properties for over 26,000 U.K. annual reports.     

Information dissemination on intellectual capital in mergers and acquisitions: purchase price allocations,press releases and business press

In order to reduce information asymmetries in relation to a firm's current decisions and long-term strategy, firms must consistently provide information to stakeholders. This paper investigates intellectual capital (IC) information disclosed in mergers and acquisitions (M&A) provided through three different disclosure channels (voluntary press releases, related newspaper articles and subsequent mandatory corporate disclosures in the notes to the financial statements). For a sample of 215 randomly selected US and European M&As, we analyse 215 press releases, 1025 newspaper articles and 215 purchase price allocations. Our findings suggest that IC disclosure in press releases is not perceived as informative and qualitative forward-looking IC information in voluntary corporate disclosures appears to lack credibility. Moreover, we empirically demonstrate interdependencies across the three disclosure channels. The business press seems to filter IC information provided in press releases. The amount of IC disclosure in the notes to the financial statements is positively associated with prior IC disclosure in newspaper articles, but negatively associated with IC disclosure in press releases. The managements of acquirer firms appear to pay attention to news coverage and public opinion. However, both voluntary and mandatory corporate disclosures appear to substitute rather than complement each other.