Corporate Annual Reports Research Articles

Data assetization and capital market information efficiency: evidence from Hidden Champion SMEs in China

Data assets serve functions such as value preservation and appreciation, financing, and value creation. They contain extensive information about enterprises’ operational status and future development prospects, providing significant references for external investors’ decision-making and greatly impacting the information efficiency in capital market. This study examines the correlation between data assetization and capital market information efficiency, along with the mechanisms and influencing factors involved. We select a sample of Chinese Hidden Champion small and medium-sized enterprises (SMEs) from 2011 to 2021, utilize text analysis methods to build a data assets dictionary, and extract keywords from corporate annual reports to depict the level of data assetization. The research results indicate that data assetization significantly enhances the information efficiency of capital market, specifically reducing stock price synchronicity and stock price delay. By categorizing data assets into own-use data assets and transactional data assets, we find that both types can improve the information efficiency of the capital market. Mechanism analysis reveals that enterprise data assetization can enhance the information efficiency of capital market by alleviating corporate financing constraints and improving forward-looking information disclosure. Factors analysis demonstrates that digital infrastructure and data circulation transactions can strengthen the enhancement effect of data assetization on the information efficiency of capital market. This study enriches the research outcomes in the micro-research field of data assets, providing valuable insights for promoting the digital transformation of Hidden Champion SMEs and the high-quality development of capital market.

Relationship between implementation of sustainable human resource practices and corporate market value

Orientation: The sustainable development goals (SDGs) were the context for examining the human resource (HR) expertise required in the boardroom. Achievement of SDGs depends on how boards are structured and whether members have the appropriate expertise to implement key HR practices to maximise corporate market value.Research purpose: This study aimed to critically examine the mediation effect of HR expertise in the boardroom on the relationship between implementation of human resource practices (HRPs) and market value.Motivation for the study: The study investigated whether HR expertise in the boardroom contributes to the implementation of key HRPs to achieve employee-related SDGs.Research approach/design and method: A randomised experimental design was performed through a bootstrap procedure to examine mediation. Data were collected from corporate annual reports through a self-constructed measurement instrument or disclosure index.Main findings: Overall, no evidence of a mediation was found, except in the case of HR expertise in the board and HR and/or remuneration committee, which yielded a statistically significant mediation effect on the implementation of some initiatives with confidence intervals close to zero.Practical/managerial implications: Human resource expertise in the boardroom plays a crucial role in achieving the SDGs, and the lack thereof affects the company’s market value. Therefore, the board of directors (BoDs) must prioritise sufficient HR expertise in the relevant structures to facilitate implementation of HRPs to achieve the SDGs.Contribution/value-add: This study is the first attempt of its kind in South Africa, and the results demonstrate the absence of a mediation effect, signalling that a lack of HR expertise in the boardroom could affect organisations’ achievement of the SDGs.

A Study on the Relationship Between Corporate ESG Performance and Overall Corporate Performance: An Analysis of the Mediating Effect of Information Transparency

This paper aims to explore the impact of ESG (Environmental, Social, and Governance) information transparency on corporate performance, with a particular focus on its mediating effect in corporate governance and the fulfillment of social responsibilities. Through an in-depth analysis, this study seeks to reveal how ESG information transparency enhances corporate governance and social responsibility, ultimately influencing financial performance and market value. A quantitative research approach is adopted, selecting several listed companies as samples and collecting their ESG reports and financial data. By constructing a model, the relationships between ESG information transparency, corporate governance, social responsibility fulfillment, and overall corporate performance are analyzed. Data sources include corporate annual reports, ESG reports, and relevant databases. Path analysis and mediation effect tests are employed to ensure the reliability and validity of the research results. This study not only examines the mediating effect of ESG information transparency on corporate performance but also delves into the moderating roles of corporate governance and social responsibility fulfillment. The findings provide essential theoretical support for companies formulating ESG strategies and offer substantial references for policymakers and investors.

Assessing Large Language Models Used for Extracting Table Information from Annual Financial Reports

The extraction of data from tables in PDF documents has been a longstanding challenge in the field of data processing and analysis. While traditional methods have been explored in depth, the rise of Large Language Models (LLMs) offers new possibilities. This article addresses the knowledge gaps regarding LLMs, specifically ChatGPT-4 and BARD, for extracting and interpreting data from financial tables in PDF format. This research is motivated by the real-world need to efficiently gather and analyze corporate financial information. The hypothesis is that LLMs—in this case, ChatGPT-4 and BARD—can accurately extract key financial data, such as balance sheets and income statements. The methodology involves selecting representative pages from 46 annual reports of large Swiss corporations listed in the SMI Expanded Index from 2022 and copy–pasting text from these into LLMs. Eight analytical questions were posed to the LLMs, and their responses were assessed for accuracy and for identifying potential error sources in data extraction. The findings revealed significant variance in the performance of ChatGPT-4 and another LLM, BARD, with ChatGPT-4 generally exhibiting superior accuracy. This research contributes to understanding the capabilities and limitations of LLMs in processing and interpreting complex financial data from corporate documents.

The Power of Culture: Business Nationalist Culture and ESG Performance

High-quality development is the theme of China’s economic and social development in the new era, and corporate ESG performance is a comprehensive indicator for evaluating the level of corporate environmental responsibility, social responsibility and governance, as well as an important yardstick for identifying the high-quality development of enterprises. This paper takes Chinese non-financial listed companies from 2011 to 2022 as the research sample and empirically examines the impact of corporate nationalism culture on corporate ESG performance and its mechanism by quantifying corporate nationalism culture using the text of corporate annual reports, natural language processing and text analysis methods. The results of the study show that corporate nationalism culture significantly enhances corporate ESG performance. The mechanism analysis suggests that corporate nationalism culture, as an internal informal system, can play a governance role and promote corporate ESG practices by changing attention allocation and mitigating agency problems. The positive effect of corporate nationalism culture on corporate ESG performance is more pronounced in the grouping of firms with lower institutional investor shareholding, fewer analysts’ attention and embedded party organisations. A heterogeneity analysis reveals that the corporate nationalism culture driving effect on corporate ESG performance is more significant in the subsample of firms with weak financing constraints, in the growth period and in the decline period. This study reveals the positive role of soft cultural factors in enhancing corporate ESG performance, providing useful managerial evidence for companies to integrate ESG concepts at the strategic level for high-quality economic development.

Types of intertextuality in Chairman’s statements

Intertextuality is a pervasive feature of all discourse, but norms and conventions vary widely across domains. Academic conventions can cause difficulties for those who have been exposed to, or move on to, domains with other practices. Academic conventions are well documented; here we examine those of business writing. We created a corpus of chairman’s statements from annual corporate reports and searched them for signalled and unsignalled intertextual relationships. We hypothesise that statements from the same company will be linked by both repeated phraseology and acknowledged intertextuality.

DOES ESG INVESTMENT IMPACT THE FINANCIAL SUSTAINABILITY OF NIGERIAN ENERGY COMPANIES: A PANEL REGRESSION APPROACH?

The destruction of around 5% to 10% of Nigerian mangrove ecosystems and the disappearance of approximately 7,400 square kilometres of rainforest have shifted managerial priorities in Nigeria's energy sector from purely financial gain to increased social responsibility. The rising concerns regarding climate change, environmental risks, social well-being, and sustainability have propelled ESG investment to the forefront of corporate sustainability considerations. The study delves into the influence of ESG investment on the financial sustainability of listed industry players in Nigeria's oil and gas industry. By utilizing quantitative data from sustainability and corporate annual reports of listed firms on the Nigeria Exchange Group from 2013 to 2023, a fixed pooled panel regression model was conducted to statistically test the three hypotheses anchored on the ESG nexus on financial sustainability. The findings indicate that the relationship between environmental investments, measured by environmental emissions, and return on assets (ROA) for the examined listed entities is insignificant. However, the research establishes a notable correlation between social investing practices, quantified by workforce size, and ROA, displaying a positive coefficient. Moreover, the study does not confirm a substantial impact of governance investing practices, measured by board size, on the ROA of the scrutinized corporations. The research acknowledged the impact of ESG on the financial sustainability of Nigeria’s energy sector. The research recommendations include integrating ESG factors into investment strategies, enhancing disclosure and transparency, improving risk management and resilience measures, and collaborating with policymakers.

Japanese climate capitalism? Toward an understanding of industry’s changing attitudes toward climate change mitigation in Japan

Despite a history of progressive environmental policies in relation to pollution and energy efficiency, Japan stands out as a country with relatively few achievements on the issue of climate change. While research on Japanese climate change policy up until now has focused attention on the role played by government, to date insufficient attention has been paid to the role and impacts of various sectors of Japanese industry in both directly influencing climate change policy and in shaping the discourse surrounding climate change in Japan, as well as to the ways through which the accumulation strategies of different fractions of capital may be impacted by climate change policy. This article overcomes this gap by surveying business responses to climate change and climate change policy through a mixed methods approach that combines content analysis and critical discourse analysis of major firms’ annual corporate reports, comparing data from 2010, the last year prior to the 2011 Great East Japan Earthquake that had highly disruptive impacts on Japan’s power generation capacity as well as the discourse surrounding energy more widely, and 2022, the most recent year for which all firms had data available. The content analysis results indicate a substantial increase in attention to climate change related keywords between 2010 and 2022 across all sectors, but particularly for the oil and gas, electric power, and steel manufacturing sectors. Yet a closer look at some of the detailed comments from key firms indicated an ongoing commitment to continued expansion of output and consumption, with carbon neutrality to be achieved wholly through the application of advanced technologies, many of which are currently commercially or technically unviable, raising questions about many firms’ abilities to effectively achieve their emissions reductions targets without more significant changes to their overall business strategies.

INVESTIGATING THE IMPACT OF AUDIT COMMITTEE ATTRIBUTES ON COMPANY PERFORMANCE: A MALAYSIAN FOCUS

Background and Purpose: This study aims to examine the relationship between selected audit committee attributes (gender diversity, size, meeting, independence, expertise) and company performance that are assessed as return on equity (ROE) and return on asset (ROA). As one of the primary corporate governance mechanisms facilitating corporate efficiency, audit committees positively impact company performance. Methodology: This quantitative cross-sectional study underpinned the agency theory through the target population: public listed companies under the Bursa Malaysia. Secondary data were gathered from the corporate annual report of 106 companies and Eikon database between 2018 and 2020 and subsequently analyzed with Pearson Correlation and Multiple Linear Regression using SPSS. Findings: Resultantly, a positive gender diversity-size correlation was identified with company performance as opposed to meeting, independence, and expertise. Furthermore, a significant gender diversity-size relationship was determined with company performance while no substantial counterparts between (i) meeting and independence and (ii) expertise and company performance were identified for the selected public listed companies. In this vein, audit committee attributes (gender diversity and size) could be utilized as a mechanism for high company performance. Contributions: The study outcomes offer useful insights into optimizing current corporate governance structures and regulations for relevant authorities. Keywords: Audit committee, corporate governance, company performance, Malaysia. Cite as: Gregory, V., Yusoff, H., Tapsir, R., & Fauzi, H. (2024). Investigating the impact of audit committee attributes on company performance: a Malaysian focus. Journal of Nusantara Studies, 9(2), 185-217. http://dx.doi.org/10.24200/jonus.vol9iss2pp185-217

Intellectual Capital Influence on Firm Value: Does Financial Health Performance Have Mediating effect? (Evidence from Manufacturing Companies in Indonesia)

The aim of this study is to determine the relationship between Intellectual Capital, Financial Health Performance, and Firm Value. This research analyzed 132 manufacturing companies listed on the Indonesian stock exchange over five years (2016–2020), with data sourced from corporate annual and financial reports. Regression analysis tested direct relationships, while path analysis with the Sobel test assessed mediation effects. The findings indicate that both intellectual capital and financial health performance significantly affect firm value directly; however, financial health performance does not show a significant mediation effect between intellectual capital and firm value. The results suggest that market participants consider information related to intellectual capital and financial health performance in their valuations, yet financial health performance does not reflect intellectual capital's capability to generate financial health. This study highlights the importance of intellectual capital and financial health performance for market participants.

Performance pressure and annual report text manipulation: Evidence from China

AbstractBuilding on attribution theory, this study investigates the antecedents of corporate annual report text manipulation from the perspective of managerial performance pressure. Using a data set comprising 15,076 samples from companies listed on China's Shanghai and Shenzhen A‐share markets between 2009 and 2021, we reveal that as management faces performance pressure, they tend to increase content about external environmental risk and policy uncertainty in annual reports due to actor–observer bias. When incorporating Confucian cultural factors into the research framework, the study found that the strength of Confucian culture mitigates the correlation between the pressure of management performance and annual report manipulation. However, the level of marketization where a corporation is located can undermine the ethical norms upheld by Confucian culture. In additional analysis, we also discovered that the longer the duration of performance pressure, the greater the extent of manipulation within the annual reports initiated by the management. Interestingly, the social performance pressure generated from ESG performance also positively influences annual report textual manipulation, compared to operational performance pressure. This study explores the impact of management performance pressure on information disclosure decisions from the perspective of performance attribution, not only extending the boundaries of attribution theory but also providing guidance for policymakers to enhance the supervision of annual report disclosures and for capital market investors to optimize investment decisions.

Corporate financial distress prediction using the risk-related information content of annual reports

This study presents a financial distress prediction model focusing on the linguistic analysis of risk-related sections of corporate annual reports. Here, we introduce a novel methodology that leverages BERT-based contextualized embedding models for nuanced extraction of financial sentiment and topic coherence. This stands in contrast to existing research, which predominantly relies on dictionary-based or non-contextual word embeddings and addresses their limitations in context sensitivity. Furthermore, we apply an innovative financial distress prediction model that combines the robust XGBoost algorithm with unsupervised outlier detection techniques. This hybrid model is specifically designed to tackle the issue of class imbalance, a persistent challenge in financial distress prediction. The efficacy of the proposed model is empirically validated using a comprehensive dataset of 2545 companies listed on major global stock exchanges. Our findings indicate that the introduced model not only significantly outperforms most existing state-of-the-art financial distress prediction models in terms of predictive accuracy, but also significantly outperforms the Loughran & McDonald dictionary-based approach and the Word2Vec model, underlining its potential as a superior analytical tool for financial distress prediction.

ANALISIS PENERAPAN AKUNTANSI LINGKUNGAN PADA INDUSTRI TEKSTIL YANG TERDAFTAR DI BEI

Currently, the problem of environmental damage has become a public concern. Textile companies are a significant source of environmental pollution due to the trash they generate throughout their production activities. Accounting contributes to environmental preservation by incorporating voluntary disclosure of environmental costs or expenses in financial statements. However, there is no standardized approach to environmental accounting disclosures within the PSAK.The study examines environmental cost accounting in 20 BEI-registered textile companies' financial statements or annual reports. The data comes from BEI-registered textile companies' annual financial statements. The study examined textile manufacturers' yearly accounting implementation using qualitative descriptive methods. Based on their corporate annual reports' CSR sections, only 10 out of 20 textile businesses have incorporated environmental accounting. Only 4 out of 10 corporations disclose their environmental expenditures in their financial or annual reports.

The impact of enterprise digital transformation on financial mismatch: Empirical evidence from listed companies in China

Efficient management of financial resources plays a crucial role in the healthy and sustainable growth of enterprises. In this study, Chinese A-share listed companies from 2012 to 2022 are selected as samples. Using text analysis technology, indicators of 'digital transformation' from corporate annual reports are identified and extracted to assess the extent of enterprise digital transformation. Then the impact of corporate digital transformation on corporate financial mismatch and its underlying mechanisms are systematically investigated. The study shows that enterprise digital transformation significantly alleviates the degree of corporate financial mismatch. This influence is achieved by easing enterprises' financing constraints, promoting technological innovation, and enhancing their level of social responsibility. The heterogeneity test shows that digital transformation has a greater mitigation effect on non-state-owned enterprises, enterprises with high degrees of industrial competition, enterprises with high degrees of regional marketization, and technology-intensive enterprises. The research conclusions provide micro-evidence for a deeper understanding of how digital transformation influences the misallocation of corporate financial resources. They also provide important insights for shaping digital economy policies and promoting high-quality development in the financial industry.

Climate change disclosure and firm value in a frontier market: Exploring the determinants

AbstractWe examine the factors that influence climate change disclosure and its effects on firm value in the context of Sri Lanka. By leveraging data spanning 1031 firm‐year observations from 2017 to 2022, an innovative machine‐learning technique is employed to quantify the level of climate change disclosure within annual corporate reports. Our findings indicate that factors such as firm size, size of the board of directors, the presence of independent and non‐executive directors on the board, and gender diversity of the board positively impact the extent of climate change disclosure. Notably, CEO duality, where the CEO and chairman roles are held by the same individual, demonstrates a negative relationship with climate change disclosure, suggesting that distinct roles can enhance transparency. This underscores the significant role of robust corporate governance practices in promoting environmental transparency and accountability. Additionally, the paper further assesses the implications of climate change disclosure on firm value, revealing that enhanced transparency in climate change disclosure positively impacts firm value.

Utilizing Machine Learning Techniques for Classifying Translated and Non-Translated Corporate Annual Reports

ABSTRACT Globalization has led to the widespread adoption of translated corporate annual reports in international markets. Nonetheless, it remains largely unexplored whether these translated documents fulfill the same function and communicate as effectively to international investors as their non-translated counterparts. Considering their significance to stakeholders, differentiating between these two types of reports is essential, yet research in this area is insufficient. This study seeks to bridge this gap by leveraging machine learning algorithms to classify corporate annual reports based on their translation status. By constructing corpora of comparable texts and employing thirteen syntactic complexity indices as features, we analyzed the reports using eight different algorithms: Naïve Bayes, Logistic Regression, Support Vector Machine, k-Nearest Neighbors, Neural Network, Random Forest, Gradient Boosting and Deep Learning. Additionally, ensemble models were created by combining the three most effective algorithms. The best-performing model in our study achieved an Area Under the Curve (AUC) of 99.3%. This innovative approach demonstrates the effectiveness of syntactic complexity indices in machine learning for classifying translational language in corporate reporting, contributing valuable insights to text classification and translational language research. Our findings offer critical implications for stakeholders in multilingual contexts, highlighting the need for further research in this field.

Linguistic Variations Between Translated and Non-Translated English Chairman’s Statements in Corporate Annual Reports: A Multidimensional Analysis

As an important component of a company’s annual report, the chairman’s statement offers an important channel for the chairman of the company to report on the company’s performance in unquantified and textual terms. The Chairman’s statement serves as background for the shareholders, investors and wider stakeholders to have an overview of a company’s performance and activities over the course of one year. In this study, three corpora were compiled from the annual reports of listed companies based in Mainland China, Hong Kong and the United States. A corpus-based multi-dimensional analysis was conducted to investigate the linguistic characteristics between translated and non-translated English chairman’s statements. The findings indicate that the translated chairman’s statements of Mainland Chinese companies are informationally denser and more context-independent than the non-translated ones of American and Hong Kong companies. The results of a fine-grained analysis show that the translated and non-translated chairman’s statements have significant differences regards various linguistic features, indicating that cultural differences and translation might constitute important factors in affecting the textual profiling. Our study has yielded some new evidence towards a more comprehensive understanding of the linguistic differences between translated and non-translated chairman’s statements, and enriching the existing knowledge of translational language. This study also offers some practical as well as pedagogical insights into communication issues in business English and business translation.

Revolutionizing energy practices: Unleashing the power of artificial intelligence in corporate energy transition

Corporate energy transition is crucial for long-term sustainable development. The widely discussed Artificial Intelligence (AI), as a disruptive technological innovation, is highly potential for enhancing environment performance. However, the specific impact of AI on the process of corporate energy transition and its underlying mechanisms have not been fully explored. This study focuses on A-share listed corporates in Shanghai and Shenzhen stock markets in China spanning from 2011 to 2021. Based on corporate annual report information and information from over 200,000 patent application texts, we innovatively construct indicators for corporate energy transition and AI technology application. Furthermore, we empirically investigate the impact of AI technology on corporate energy transition and its potential mechanisms through combining information asymmetry theory and institutional theory. The empirical results indicate that: 1) AI can drive corporate energy transition and the promoting effect of AI collaborative innovation on corporate energy transition should not be ignored. 2) AI can help corporates achieve energy transition through pathways such as mitigating information asymmetry, reducing financing constraints, adjusting sustainable development concepts and practices. 3) The driving effect of AI on corporate energy transition varies depending on the characteristics of different types of corporates, industries, and regions. This study provides strategic guidance and decision support for business managers and policymakers, assisting both corporates and governments in better utilizing AI technology during the social energy transition process to achieve a dual optimization of environmental and economic goals.

The Role of Sustainability Statements in Investor Relations: An Analysis of the Annual Reports of Airline Companies

Investors are one of the primary target audiences for corporate communication; they seek non-financial as well as financial information from the companies they invest in, and they consider the social and environmental sustainability of these companies in addition to their economic sustainability. Because of this, as a tool for investor relations, annual reports now routinely and regularly incorporate non-financial information. This study examined thirty annual reports from six public airline firms issued between 2018 and 2022. A total of 8115 expressions on social, economic, and environmental sustainability issues—divided into 125 themes—were coded and analyzed in Maxqda 2020. Among the conclusions was the fact that, in 2022, all of the examined companies devoted 9% of their pages to sustainability statements and included them as an individual topic in their reports. It was found that 64% of both the sustainability-related pages of the reports and the messages of the company managers included in the report consisted of social sustainability statements, with the theme of governance playing an important role in these explanations. Additionally, it was revealed that the topics of governance issues (22.6%), the natural environment (21.7%), and human resources development (15.5%) are the most frequently discussed social, environmental, and economic sustainability themes in corporate annual reports.

Construction of a sustainability reporting score index integrating sustainable development goals (SDGs). The case of Sri Lankan listed firms

PurposeAlthough publicly listed firms in Sri Lanka have been increasingly adapting sustainability reporting into their annual reporting practices, a limited number of firms prepare sustainability reports by integrating sustainable development goals (SDGs) into reporting mechanisms. This study attempts to develop an index to monitor firms' sustainability reporting practices based on Global Reporting Institute (GRI) guidelines integrating SDGs.Design/methodology/approachThis paper develops a sustainability score index using the 17 SDGs utilising the results of content analysis of corporate annual reports of a selected sample of 100 firms listed on the Colombo Stock Exchange (CSE). Principal component analysis was employed to examine the reliability of data in the developed index.FindingsFindings show that the developed scoring index is efficient for evaluating the contents of the sustainability reports of Sri Lankan firms. Sustainability reporting practises with regard to the SDGs were observed to have a turbulent period from 2015 to 2019 and the SDGs 12 and 15 were identified to be mostly reported in Sri Lankan corporate sustainability reports.Research limitations/implicationsThe results of the study add to knowledge on the monitoring of sustainability reporting practises with reference to SDGs. The study outcomes are useful for the investors, stakeholders, and statutory bodies to measure the sustainable performance of business firms and assess the firm’s commitment towards the global sustainability agenda.Originality/valueTo the best of our knowledge, this is the first study that constructs a sustainability reporting score index integrating SDGs.