Abstract
Strategy reporting is of high interest to investors and can be seen as decision-useful information. The focus of this study is to analyze the determinants of the quality of voluntary strategy disclosure in German management reports of capital market-oriented companies. Based on a theoretical analysis, hypotheses are formulated to investigate the determinants of the quality of voluntary strategy disclosure. In order to test the hypotheses, a number of statistical tests are performed, especially multiple regression analyses. It is based on a unique hand-collected dataset with a self-constructed scoring model, which measures the quality of voluntary strategy disclosure. The sample comprises 110 largest companies in Germany for the period between 2014 and 2018. The results indicate that firm size, firm growth and capital intensity determine voluntary strategy disclosure significantly and positively. Conversely, firm age, financial leverage, ownership structure and profitability do not have a significant relationship with voluntary strategy disclosure. The results are robust to different statistical analysis. This research provides insights into a neglected topic in academia and helps decision-makers in practice and regulators to better understand voluntary strategy disclosure of capital market-oriented companies.
Highlights
A clear and focused strategy is vitally important, especially for capital market-oriented companies because they are of high public interest (Porter, 1980, 1997)
As disclosure of strategy relevant information is on a voluntary basis, this study considers regulations on voluntary strategy disclosure according to German Accounting Standard (GAS) 20
The determinants influencing the quality of voluntary strategy disclosure are largely under-researched, thats why this study has the aim to close a research gap
Summary
A clear and focused strategy is vitally important, especially for capital market-oriented companies because they are of high public interest (Porter, 1980, 1997). This study measures the quality of voluntary strategy disclosure. The impact of various company specific determinants on voluntary strategy disclosure in management reports of German capital market-oriented companies is analyzed. We test this by relating voluntary strategy disclosure level to firm size, firm age, firm growth, capital intensity, financial leverage, profitability and ownership structure. We construct a scoring model for the measurement of the quality of strategy disclosure and formulate a company-specific Strategy Disclosure Score (SDScore).
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