Determinants of Consistent Capital Market Communication: Evidence from Germany

Abstract

This paper investigates the level of consistency in using financial key performance indicators (KPIs) in capital market communication in Germany and examines specific determinants of consistent KPI reporting. To measure such consistency, the study reports three consistency indices that were uniquely developed for this pa-per. The indices measure the consistent KPI reporting of a sample of German listed companies from 2009 to 2014 and consist of up to 396 firm year observations. These indices indicate a high level of inconsistency in the reporting behaviour of German companies in the management report, the annual report and capital market communication. The results range from 36% to 48% consistency, indicating room for improvement. The results of a random effects regression analysis report for all indices that the level of consistency increased significantly in 2013 and 2014. The study shows that profitable firms and firms with an above average number of KPIs report more consistently than other firms. This paper contributes to the literature on disclosure topics in accounting by introducing KPI consistency indices as a proxy of disclosure quality and demonstrates that the KPI reporting behaviour of German firms lacks consistency.