Corporate Reports Research Articles

Does IFRS and GRI adoption impact the understandability of corporate reports by Chinese listed companies?

AbstractThis study examines whether the adoption of IFRS and GRI impacts the readability and conciseness of corporate reports. We investigate the corporate reports of the top 100 A‐share listed Chinese companies from 2014 to 2018. Our results suggest that both readability and conciseness of the corporate reports are at a low level and indicate a downward trend over our sample period. We also find that IFRS adoption results in a longer and more readable report, whereas GRI adoption leads to a longer but less readable report. Our findings are of interest to academics, management, investors, and regulators.

Methodology for researching corporate disclosure of business social responsibility: Information base and stages of implementation

This article continues a series of publications on the issues of accounting, analysis and assessment of the corporate social responsibility in a rapidly changing environment when society and business face new challenges. The authors provide methodological solutions to the problem of studying the social responsibility of Russian public companies based on the analysis of data disclosed in their financial and non-financial statements. The research uses abduction methods; logical analysis; logical content analysis of financial and non-financial reporting standards in terms of requirements for disclosure of social aspects; expert analysis of social reporting of Russian companies; linguistic analysis in order to identify the practice of using certain terms and concepts in the financial and non-financial reporting. The analysis of corporate reporting standards made it possible to propose a new model for analyzing disclosures in the field of corporate social responsibility. The authors reveal the most important issues of the corporate social responsibility by assessing the trends in the social sphere, identifying opportunities and threats for its further development connected with the evolution of society, economy and ecology, ongoing digitalization processes. Procedures of researching business social responsibility are developed and fully described. The documentary base of the research includes International Financial Reporting Standards, Sustainable Development Reporting Standards, Basic Performance Indicators of the Russian Union of Industrialists and Entrepreneurs (RSPP) as well as financial and non-financial reports of Russian companies operating in production industries. The results of the research are the proposals to apply the multi-stage approach, which makes it possible to assess the social responsibility of certain economic entities through the prism of global tasks the country and the world community face with. The analysis of the complex problems of business and civilization allows us to identify five top problems in the light of which the social responsibility of large companies should be assessed, as well as to build a logical connection between these top problems and the key topics of disclosures in corporate reports.

Formation of Risks’ Information in Corporate Accounting and Reporting

The paper examines the impact of risk management practices on improving the competitiveness and financial stability of corporations. The purpose of the study is to develop recommendations for the formation in accounting and disclosure in the accounting (financial) statements of information about the risks inherent in the activities of corporations. The need for the above is noted by the document of the Ministry of Finance of Russia “Information No. PZ‑9/2012”. A critical analysis of the risks typologies presented in the studies of domestic and foreign researchers that had allowed to draw a conclusion about their quantitative increase in the number of risks of corporations including such as: stoppages and disruptions of production due to the death and damage of assets (equipment, transport, raw materials); overvoltage of technical and technological systems; problems inadequate use of raw materials; rising costs and other factors. The author introduces the concept of the risk of loss of a corporation’s equity capital caused by a decrease in the value of assets, which can be identified by impairment testing, which ensures the reliability of the assessment of the accounting objects and elements of accounting (financial) statements. Risk assessment based on the assumption that assets are shown in reliable value in the appropriate accounts and ledgers, is one of the elements of internal control of the corporation and allows users to make informed economic decisions. Impairment testing involves the identification of external and internal indicators characteristic of certain assets, the calculation of the amount of impairment, systematization and disclosure of information in accounting and reporting. Along with the recommended risks typology it is advisable for the Ministry of Finance of Russia to include in the list of risks to be disclosed in the accounting (financial) statements, the risks of loss of equity capital due to asset depreciation. It has been proven that the analysis and assessment involve identifying risk-forming factors, determining the level of risk and developing measures to reduce the risk. Therefore, it is expediently to systematize the risk information in corporate accounting and reporting standards, the use of which is recommended by the Federal Law “On Accounting”.

How IT Investments Help Hospitals Gain and Sustain Reputation in the Media: The Role of Signaling and Framing

Practice- and Policy-Oriented Abstract Understanding how IT investments help organizations to build and sustain reputation is of particular relevance for healthcare practitioners and policy makers because patients are often unable to assess the quality of care, relying instead on the reputation of health service providers in the media, such as newspapers. As information intermediaries, journalists detect, aggregate, and translate the weaker signals for quality, such as state-of-the-art IT, that a hospital emanates. Our analysis of 152 hospital organizations in England, complemented by interviews with healthcare journalists, shows that journalists write less negatively about hospitals when healthcare organizations’ IT equipment investments are high. This implies that investments in IT equipment can buffer hospitals from negative press, thereby helping them to gain and maintain a strong reputation in the media. Practitioners and policy makers may incorporate the reputational effect of IT when making investment decisions and further amplify such IT investment through press releases, corporate reports, and media interactions.

Timeliness of Financial Reporting: The Examination of Auditor Tenure and Industry Specialization

This study examines the effect of auditor tenure and industry specialization on financial reporting timeliness. Using evidence from the corporate report of public listed companies in Malaysia, the results from multivariate regression analysis show that audit firm tenure and industry specialization are associated with financial reporting timeliness. The findings show that audit tenure is positively associated with a timelier financial reporting, indicating a shorter audit period. This evidence is consistent with the knowledge spillover arguments. The results also indicate that industry specialist is linked with less timely financial reporting, in which the appointment of industry specialist would result in a longer period to complete audit, probably because a large number of clients to be handled. The result is robust even after including various controls namely auditor size, audit fees, audit committee size, CEO duality, financial year end, firm size, leverage, and growth. The evidence suggests that financial reporting timeliness can be improved by retaining incumbent auditor and selecting a non-industry specialist. This study contributes to the existing literature on the role of auditor in providing timely financial reports. The results of this study are useful for regulators in Malaysia as an input for their effort in setting the rules and regulation relating to auditor tenure to enhance the relevance of corporate reports produced by publicly listed firms.

Abnormal disclosure tone, earnings management and earnings quality

PurposeThe authors investigate whether abnormal tone in corporate narrative disclosures is associated with earnings management and earnings quality, in an emerging market context. Based on agency theory and opportunistic/impression management perspective, this study examines whether executives manage disclosure tone to support their opportunistic behavior, when using earnings management.Design/methodology/approachThis study uses a sample of earnings press releases of publicly traded firms in the MENA region during 2014–2019. It employs textual analysis to measure disclosure tone. The authors estimate abnormal disclosure tone after controlling for firm characteristics. Discretionary accruals proxy for earnings management and are estimated using Modified Jones model. Earnings quality is measured using accounting-based and market-based proxies: earnings smoothness, persistence, predictability and value relevance/informativeness.FindingsResults show a positive association between abnormal disclosure tone and earnings management. Additionally, results show that earnings persistence is higher for firms with lower levels of abnormal disclosure tone. Results are sustained for earnings smoothness, but not for predictability and value relevance/informativeness.Research limitations/implicationsResults provide initial evidence of management's use of tone management jointly with earnings management. This adds to prior studies adopting the opportunistic perspective of disclosure tone, through showing that discretionary tone in narrative disclosures can be strategically used by management to influence investors' perceptions.Practical implicationsThe results provide valuable insight to board of directors, auditors and market participants on the possible biases emerging from tone of narrative disclosures in corporate reports. For regulators and standard-setters, results shed light on the need for regulations and rules beyond financial statements, to guide disclosure of narrative information in different corporate reports.Originality/valueThis study contributes to the rare evidence that investigates textual disclosure characteristics to uncover management's opportunistic practices and assess earnings quality. Where majority of studies concentrate on developed markets, this study provides novel evidence of emerging markets by examining the association between abnormal disclosure tone and earnings management/earnings quality. Also, it validates the tone management model proposed by Huang et al. (2014) for capturing tone manipulation.

Корпоративне звітування: європейський досвід

Disclosure of environmental, social and governance aspects (ESG) in the activities of companies of the European Union Member States (mainly large and medium-sized businesses) has recently become increasingly relevant. The purpose of the study is to summarize the European experience regarding the essence, format of presentation, contents, regulatory support and the main problems that arise in the preparation of corporate reporting. The article determines that corporate reporting in the EU is at the stage of development and continuous improvement, since information requests of internal and external stakeholders are changing daily, to which the management of companies has to respond promptly and efficiently. European experience in understanding the economic essence of corporate reporting is considered. The main prerequisites for the implementation of corporate reporting and elements of the non-financial component of corporate reports in the EU are allocated. The regulatory support operating in individual Member States of the European Union on the formation of corporate reporting (the scope of the company’s activities, non-financial indicators reflected in the reporting, etc.) is considered and analyzed, which constitutes an important basis for the development of the principles of sustainable development. The main proposals on corporate reporting on sustainable development, submitted in 2021 by the European Commission, are outlined. The most common reporting formats reflecting the effectiveness of the implementation of ESG aspects at enterprises are considered. It is determined that the formation of a non-financial component in corporate reporting provides specific benefits for the company, helps to strengthen investor confidence, be more transparent, open up access to new sources of capital for companies, but at the same time it is a troublesome process that creates new challenges for the scientific community and business.

Recognising Sustainability through the Corporate Reports – A Review of Development of Disclosures in India

Recognising Sustainability through the Corporate Reports – A Review of Development of Disclosures in India

Racionalidade substantiva no gerenciamento de impressões: Uma análise dos relatórios corporativos da empresa JBS

ABSTRACT Objective: To investigate the substantive rationality inherent to the practice of impression management (IM). Originality/value: Based on the taxonomy created by Merkl-Davies and Brennan (2011), it is analyzed: 1. the discussion under the sociological perspective; and 2. the actions of substantive rationality in the management of impressions that can manifest through actions of symbolic management. This study responds to the call of Merkl-Davies et al. (2011) by putting into practice an unconventional analytical model based on the use of the corporate reports (annual and sustainability) of the company JBS with special attention to the “Carne Fraca” [Weak Meat] Operation. Design/methodology/approach: A content analysis of the accounting narratives of JBS’ corporate reports between 2015 and 2018 was carried out. Findings: Accounting narratives suggest evidence of IM and substantive rationality. The preparers of the corporate reports used substantive rationality to legitimize the company’s actions, with the most significant manifestations of this practice in the 2017 report, the year of the “Carne Fraca” operation. The implications of this research lie in demonstrating evidence that guides companies regarding the use of accounting narratives to convince society of their actions as consistent with the structure of social rules and norms. Furthermore, we emphasize that the accounting narratives must be analyzed with caution since they can be elaborated under the influence of the manager’s opportunistic behavior.

Transformation of business models of large Russian firms under internationalization and institutional changes

Goal: to identify strategic responses of large Russian companies running international activities to changes of situational factors in their external environment and subsequent transformation of their business models. Methodology: empirical basis of the article consists of primary data obtained through interviews conducted with representatives of large Russian corporations, and secondary data from open sources, corporate reports and media publications. Findings: the author formulated three assumptions that emphasize different business model blocks: the one with the highest competitive advantage concentration, the one with concentration of a company’s activities in the home market, and the one that is most subject to institutional changes. Contribution of the author: the study results form new approaches within the framework of institutional theory and represent a further step toward understanding a process of business model transformation of Russian companies under significant institutional changes.

Corporate social responsibilities and financial reporting quality: Evidence from Jordanian manufacturing firms

The basic aim of the ongoing article is to examine the impact of social corporate responsibilities on the financial reporting quality of Jordanian manufacturing firms. For this purpose, data has been extracted from the top fifteen manufacturing companies by using corporate reports along with the Amman Stock Exchange from 2010 to 2020. The random effect model along with the generalized method of moment (GMM) has been executed for analysis purposes. The results revealed that social corporate responsibilities have positively impacted on the financial reporting quality of the Jordanian manufacturing firms. These findings have been guided to the regulators that they should provide the focus on the social corporate responsibilities that enhance the quality of financial reporting of the firm. The findings of the current study may be helpful for the manufacturing firm who wants to produce better quality of financial reporting along with the upcoming studies who want to investigate this area in their studies.

A Defense on Accounting Discretion: An Empirical Inquiry based on Users’ Awareness

Corporate performance is a key in corporate accounting. One of the earliest accounting measures of corporate performance is accounting income. Accrual accounting enables the measurement of changes in net assets of an entity. Accounting income is neither scientifically determined nor proven. Accounting information often results from approximation and estimation when choice among alternatives is professionally judged, rather than exact measures and perceptions. Divergence in application of accounting policies in corporations under similar conditions may present different results. Some criticize corporate accounting, particularly after scandals related to financial statement fraud, for choices among procedures that accounting standards permit. However, choices in the application of accounting permitted procedures that accounting standards allow are based on professional judgment. Professional judgment enables accounting as a profession and allows accounting professionals to claim status in their respective communities. Exploring users’ awareness of corporate reports in Saudi Arabia in terms of flexibility in using accounting methods when preparing corporate reports and analyzing their understanding of corporate reports, this study surveyed 72 financial statement users. Research has found that sufficient efforts must be made to obtain information when making investment decisions. As accounting income is a result of applied accounting procedures and methods, users perceive information published in the financial reports, including notes, as understandable. Flexibility in applying accounting standards is imperative for adapting to changes in the entity’s business environment. Potential capital market investors must maintain a minimum level of knowledge; otherwise, they might be gambling their wealth or savings against the odds.

СОВРЕМЕННЫЕ ТЕНДЕНЦИИ РОССИЙСКОГО КОРПОРАТИВНОГО УПРАВЛЕНИЯ

The importance of modern corporations is huge both in the world and in the Russian economy. Today, corporate governance is the most important institution that is able to regulate relations in the corporation. Due to a number of events taking place in the economic and geopolitical sphere, it is possible to notice a significant change in the course of corporate governance development. The purpose of this article is to identify and analyze the current trends in the development of Russian corporate governance. During the research, materials from open access, reports of Russian corporations, and the works of domestic economists in the field of corporate governance were used. The identified trends in the development of corporate governance are the results of this work. Among them, first of all, it is necessary to highlight the expansion of the target orientation of modern organizations, the beginning of the dominance of environmental and social goals in the development agenda of corporations. The focus on digitalization comes to the second level as a trend. And the diversification of the corporation’s activities through the creation of its own ecosystems is the third trend in the development of modern corporate governance. The fourth trend in this work was highlighted by a decrease in activity on the stock markets on the part of Russian corporations.

Corporate Sustainability Accounting and Reporting in Kenya

Corporate Sustainability Accounting and Reporting in Kenya

Substantive rationality of impression management: An analysis of corporate reports of JBS

RESUMO Objetivo: O objetivo deste estudo foi investigar a racionalidade substantiva inerente à prática do gerenciamento de impressões (GI). Originalidade/valor: Com base na taxonomia criada por Merkl-Davies e Brennan (2011), analisam-se: 1. a discussão sob o eixo da perspectiva sociológica; e 2. as ações de racionalidade substantiva do GI que podem se manifestar a partir de ações de gestão simbólica. Nesse sentido, este estudo atende ao chamado de Merkl-Davies et al. (2011) ao colocar em prática um modelo pouco convencional de análise a partir da utilização dos relatórios corporativos (anual e de sustentabilidade) da empresa JBS com especial atenção à Operação “Carne Fraca”. Design/metodologia/abordagem: Foi empreendida uma análise de conteúdo das narrativas contábeis dos relatórios corporativos da JBS entre o período de 2015 a 2018, à luz da estrutura conceitual de Merkl-Davies e Brennan. Resultados: As narrativas contábeis sugerem indícios de GI e da racionalidade substantiva. A racionalidade substantiva foi utilizada pelos preparadores dos relatórios corporativos a fim de legitimar as ações da companhia, sendo as manifestações dessa prática mais significativas no relatório de 2017, ano do evento Operação “Carne Fraca”. As implicações desta pesquisa residem em demonstrar evidências que direcionam as empresas quanto ao uso de narrativas contábeis para convencer a sociedade de suas ações condizentes com a estrutura de regras e normas sociais. Ademais, destacamos que as narrativas contábeis devem ser analisadas com cautela, uma vez que podem ser elaboradas sob a égide do comportamento oportunista do gestor.

Social Capital, Corporate Reporting Culture, and Accounting Conservatism

Social Capital, Corporate Reporting Culture, and Accounting Conservatism

New Aspects of Sustainability: Analysis of the European Practice of Non-Financial Reports

Companies must report compliance with environmental (E), social (S) and governmental (G) criteria in accordance with the disclosure rules (framework) for non-financial information. In our study, we examine the characteristics of ESG reports, whether they reflect the sustainability performance of individual market players, as well as what the most relevant problems are regarding this issue, not underestimating the fact that the most serious problem of corporate sustainability in 2022 was energy supply difficulties and price problems. In the course of our research, we have come to the conclusion that there are a number of parallel mandatory and optional disclosure requirements that require the publication of different data, so they are only partially suitable for comparing the sustainability activities of companies. Some of the corporate reports deal with ESG issues only in principle and only a small proportion reports on actions and results. We have also made suggestions that support the comparability of companies based on ESG indicators.

Involvement of major Russian corporations with the fulfilment of the UN's Sustainable Development Goals: assessment of current achievements and development opportunities

Subject. Every 8-10 years, the global economy faces financial crises that slow down and drive back its development. The UN's Sustainable Development Goals were announced as one of the ways to smooth the cycles. Most countries are actively involved in the fulfilment of this global project. An important precondition for the transition to a sustainable development path is the participation of the corporate sector. However, under capitalism, solving such a problem is not an easy task since many items within the UN's Sustainable Development Goals are not profitable for corporations and do not contribute directly to capitalisation. In this regard, the study and search for opportunities to introduce the UN's Sustainable Development Goals into corporate practices is a very important issue which corresponds to the modern global agenda of economic development. The purpose of the study is to analyse the involvement of major Russian corporations with the achievement of the UN's Sustainable Development Goals using open data based on corporate reports. The methods of the study included the analysis and synthesis of publicly reported data, grouping and expert assessment of published information related to the topic of the UN's SDGs in the annual reports of Russian corporations. Conclusions. The study revealed positive dynamics related to the involvement of companies with the achievement of the UN's SDGs. It is more pronounced in the areas where the UN's SDGs intersect the economic interests of corporations. It was shown that there is no uniform form for information disclosure, significant differences in the volume and quality of information presented in the companies’ reporting, and no common understanding of a number of goals by corporations. According to the results, most of the work aimed at fulfilling the UN's SDGs is carried out by Russian export companies with a predominance of private investors within the structure of business ownership. State-owned companies and companies focused on the domestic market are lagging behind in their development in this direction by all indications. As a recommendation, it was proposed to develop public reporting formats and better disclose the processes related to the fulfilment of the UN's SDGs.

“It’s a long story…” – impression management in South African corporate reporting

PurposeThe purpose of this paper is to investigate whether companies listed on the Johannesburg Stock Exchange use impression management techniques to obscure financial performance across the corporate reporting suite.Design/methodology/approachMixed-effect linear regression models were used to examine whether there is a relationship between the financial performance of a company and the length or complexity of the reports produced.FindingsConsistent with trends examined internationally, companies with lower financial performance tend to present lengthier disclosures throughout the reporting complement. However, there is limited evidence to suggest a definitive relationship between report complexity and performance. Corporate reports have maintained a consistent level of complexity and are not easily readable.Social implicationsThis paper is unique as it simultaneously considers multiple corporate reports, including the annual financial statements, integrated reports and market announcements. The paper contributes to the limited body of literature on impression management from emerging economies.Originality/valueA comparison of the complexity measures to the average education level of South Africans indicates that most corporate reports are not readable to the layman investor. Thus, despite there being no definitive relationship between complexity and performance, there is impetus to simplify corporate reporting.

Determining the content of corporate reporting on human rights

Business enterprises have to report their activities to stakeholders in order to provide corporate transparency. Non-financial corporate reports provide a comprehensive coverage of environmental, socio-economic, labor, health, and human rights issues. In the paper the author argues that a uniform definition of a sector-specific human rights issue in reporting frameworks, rather than self-identification by enterprises of salient human rights issues, would help to achieve standardization and thus the possibility of sanctions in the event of false or misleading reporting. The author analyzes existing international and regional non-financial reporting instruments regarding the human rights included in it. The main content issues of non-financial reporting are derived and given requirements to improve them. The author further analyzes whether the two main frameworks for human rights reporting (the GRI Standards and the UNGPs Reporting Framework) currently meet the requirements for content defined in the paper and, if not, how they can be changed.