The Contribution of Management Commentary Index (Ma.Co.I) in Annual Banking Reports (ABR) and the Chronicle of the Great Greek Crisis

Alexandros Garefalakis,Augustinos Dimitras

doi:10.4236/tel.2016.65103

Abstract

The research explores the extent to which the implementation of International Financial Reporting Standards (IFRS) in the Greek banking sector has affected its financial and narrative reporting between the periods prior (2002-2004) and after (2005-2010) the implementation of the IFRS. In particular, we examine the relation between Price per Share (P), Earnings per Share (EPS) and the Book Value (BV) per share using data from listed banks of Athens Stock Exchange (ASE). Further, the change of the narrative reporting quality of the Greek banking sector is studied along with the key financial indicators trends between the two above periods. Moreover, we investigate the disclosure quality of narrative information of annual reports for the period after the Greek financial crisis (i.e. from 2008 to 2010). Finally, we assess the relation between the key financial indicators and Management Commentary (MC). The findings indicate a positive relationship between P, BV and EPS after the first period of IFRS adoption (i.e. from 2005 to 2007). In addition, we report that MC has been considerably improved in the same period, while a positive impact in the key financial Indicators has been observed. Furthermore, empirical evidence specifies that Debt tends to be the most important indicator of Management Commentary. Finally, in the beginning of Greek crisis period the disclosure quality of narrative portion of annual reports are lower except. An important innovative characteristic of the above results is that the Management Commentary Index (Ma.Co.I) is able to measure the actual quality of Annual Banking Reports (ABR) and provide a reliable and unique tool for the investors.

Highlights

According to the European Community Regulation No 1606/2002, all the European Union listed companies are required to prepare their consolidated financial statements in accordance to International Financial Reporting Standards (IFRS) as from 1 January 2005
An important innovative characteristic of the above results is that the Management Commentary Index (Ma.Co.I) is able to measure the actual quality and reliability of the banks financial statements and proposed the ranking of them
Various scholars have attempted to analyse the narrative portion of financial statements, the results presented a theoretical basis of assessment

Summary

Introduction

According to the European Community Regulation No 1606/2002, all the European Union listed companies are required to prepare their consolidated financial statements in accordance to International Financial Reporting Standards (IFRS) as from 1 January 2005. The importance of the annual reports narrative portion has been recognized by practitioners and researchers where the advances in the improvement of the amount and the quality of information provided to investors, lenders, among others, is judged as significant This narrative portion in the financial statements is referred to as “Management Discussion and Analysis-MD&A” in the US and “Operating and Financial Review—OFR” or “Business Review” in the UK. The [1] defines the notion of MC as “the information that accompanies financial statements as being a part of an entity’s financial reporting It explains the main developments and issues underlying the progress, performance, and position of the entity’s business during the period covered by the financial statements. It presents and analyses the main trends and factors that are likely to affect the entity’s future development, performance and position”

Objectives

Methods

Results

Discussion

Conclusion