Economic consequences of key performance indicators' disclosure quality |
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| Institution: | 1. Damietta University, Egypt;2. University of Plymouth, UK;3. University of Florence, Italy;4. University of Glasgow, UK;1. Department of Commerce, School of Management, Pondicherry University, Pondicherry 605014, India;2. Department of Commerce, School of Management, Pondicherry University, Pondicherry 605014, India;1. Newcastle University Business School, 5 Barrack Road, Newcastle upon Tyne NE1 4SE, UK;2. National Bank of Poland, Financial System Department, ul. ?wi?tokrzyska 11/21, 00-919 Warszawa, Poland;3. Warsaw School of Economics, Institute of Econometrics, al. Niepodleg?o?ci 164, 02-554 Warszawa, Poland;1. Plymouth University, UK;2. Mansoura University, Egypt;3. Ain Shams University, Egypt;1. School of Accountancy, Fogelman College of Business and Economics, The University of Memphis, Memphis, TN 38158, United States;2. Lawrence Technological University, Detroit, MI, United States |
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| Abstract: | Starting from 2006, UK listed companies are required to analyse their performance by using key performance indicators (KPIs) in specific sections of their annual reports and the UK Accounting Standard Board (ASB) provides companies with guidelines for the best practice regarding KPI disclosure. Motivated by the possible effects of the KPI disclosure quality, we examine their potential economic consequences for a sample of UK listed firms for the period 2006 to 2010. Our sample consists of 448 firm-year observations. We first develop a measure for the quality of the KPI disclosure based on the ASB's guidelines. We then test the economic consequences of financial and nonfinancial KPI disclosure quality both separately and combined into one variable. Our findings, after conducting various sensitivity tests, suggest that only the disclosure quality of financial KPIs matters. We find a significantly negative (weakly positive) relationship between disclosure quality of financial KPIs and the implied cost of capital (firm value). These results inform regulatory bodies as well as the academic literature about the potential economic consequences of this type of disclosure. |
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