Forward-looking Disclosure Research Articles

GENDER DIVERSITY, BOARD SIZE, AND FIRM AGE ON FORWARD-LOOKING INFORMATION DISCLOSURE AND ITS IMPACT ON FUTURE PROFITABILTY

Objective – This study aims to determine the effect of gender diversity on board, board size, and firm age on forward-looking information disclosure in the company's financial statements. In addition, it is also to determine the impact of forward-looking information disclosure on future profitability. Design/Methodology/Approach – The method used in this research is a quantitative approach. Using purposive sampling technique, the final sample is 122 samples of manufacturing companies listed on the IDX during the 2020-2022 period. The data was processed using multiple regression analysis using by SPSS 25 software. Findings – This study found that gender diversity and board size variables have no effect on forward-looking information disclosure. Meanwhile, firm age has a significant negative effect on forward-looking disclosure. This study also found that forward-looking disclosure has a positive effect on future profitability. Conclusion and Implications – This study shows that among gender diversity, board size and firm age, only firm age has an effect on forward-looking information disclosure. In addition, this study shows that forward looking disclosure also plays an important role in improving financial performance and market reputation.

Voluntary forward-looking disclosures and default risk pricing

This study examines the effects of textual and numerical information contained in voluntary forward-looking management forecast reports (MFRs) on the pricing of default risk. We find that abnormal changes in credit default swap (CDS) premiums around MFR issuance dates are inversely associated with textual quality and the extent of positive textual news conveyed in the MFR. Furthermore, we find that the negative association of CDS premiums with either textual or numerical news is qualified by the MFR’s textual quality. Collectively, our evidence implies that CDS counterparties use textual quality to verify the quality of the information disclosed in both textual and numerical modes before impounding it into the default risk price. These findings suggest that multimodal verification can enhance the overall information quality of incentive-driven disclosures.

Forward-looking disclosure effects on stock liquidity in China: Evidence from MD&A text analysis

We investigate the impact of forward-looking disclosures in annual reports on stock liquidity in China. Analysis of the MD&A sections within annual reports demonstrate a strong positive correlation between forward-looking disclosures and a company's stock liquidity. This promotional effect appears more pronounced within high-tech companies and those with lower levels of information transparency. Mechanistic tests indicate that the increase in equity liquidity attributable to forward-looking disclosures can be traced to heightened interest from analysts and media coverage. Further examination of the impact of MD&A textual characteristics reveals that improvements in the readability and tone of the text strengthen the effect of forward-looking information on enhancing stock liquidity. Economic consequence tests show that forward-looking disclosures not only enhance stock liquidity but also contribute to expanding investment scale, reducing financing costs, and improving both future firm performance and market valuation. These findings suggest that augmenting the efficiency of capital market information dissemination could significantly bolster financial support for the real economy.

An accounting perspective on the IFRS sustainability reporting standards for greenhouse gas emissions: implications for the Asia Pacific

ABSTRACT From an accounting perspective, we critically review the IFRS sustainability standards regarding its acceptability. The sustainability standards have serious implementation issues due to (1) their lack of financial reporting framework; (2) high compliance cost issues, particularly for entities in developing countries; (3) forward-looking disclosure requirements; (4) triple cost burden for the measurement, attestation and increased audit involvement for GHG emissions; (5) the possibility of compromised audit quality; and (6) issues with financed emissions. IFRS does not have accounting standards for recognizing, measuring and presenting climate-related financial statement items. As a result, diverse methods for climate-related accounting are practiced. IFRS must set GHG-related accounting standards to culminate the goal of integrating sustainability reporting into the financial reporting framework. In the Appendix, we developed two illustrative examples as temporary guidance to help the regulated entities recognize GHG-related financial statement items until IFRS releases the standards.

The impact of forward-looking disclosure on the transparency of integrated reporting through identifying risks and opportunities, developing strategies, and allocating resources.

The research aims to reveal the extent to which forward-looking information contributes to influencing the transparency of the content of integrated reports through disclosure of risks, opportunities, strategy, and resource allocation. A questionnaire was conducted that clarifies the extent to which forward-looking information can enhance the transparency of integrated reports. The questionnaire was distributed to a group of beneficiaries of forward-looking information in the Iraqi stock market, including investors for the most part, and some auditors. The most important conclusions that were reached are that there is a positive (direct) relationship with a moral effect between forward-looking disclosure and knowledge of risks. And opportunities, strategy, and resource allocation. The most important recommendations are the preparation of training workshops by the Iraqi Stock Exchange to manage the economic unit, to help it know how to forecast and the basics of preparing forward-looking information.

The impact of forward-looking disclosure on the transparency of integrated reports through: the governance system, business model, and rules for preparing and presenting integrated reports.

The research aims to demonstrate the extent to which future disclosure contributes to influencing the transparency of the governance system, the business model, and the rules for preparing and presenting integrated reports. A questionnaire was conducted to clarify the extent to which future information can enhance the transparency of integrated reports. The form was distributed to a group of beneficiaries of future information in the Iraqi stock market, including investors for the most part, and some auditors. The most important conclusions that were reached are that the relationship is positive and has a moral impact between future disclosure, the governance system, and the business model. And the rules for preparing and presenting integrated reports. The most important recommendations are the need for all economic units to hold awareness sessions that expand the awareness of management and its employees about what future disclosure is, the mechanism for preparing such information, how to include it in integrated reports, and its importance

The impact of forward-looking disclosure on the performance-related variables in the annual reports of Egyptian firms registered in the stock Exchange.

The impact of forward-looking disclosure on the performance-related variables in the annual reports of Egyptian firms registered in the stock Exchange.

NON-FINANCIAL INFORMATION DISCLOSURES AND FIRM PERFORMANCE OF LISTED NON-FINANCIAL SERVICES FIRMS IN NIGERIA

This study explored the impact of non-financial information disclosures on the performance of non-financial services firms listed in Nigeria. It utilized an ex-post facto research design on panel data extracted from annual financial reports of selected firms spanning from 2013 to 2022. The methodology involved Generalized Linear Models (GLS) regression analysis, performed using E-Views V.9.0 software. Diagnostic tests were conducted to ensure compliance with panel assumptions, and hypotheses were evaluated based on the specific model formulated. The study utilized two models with dependent variables being accounting-based (Return on Equity - ROE) and market-based (Net Assets per Share - NAPS) to measure various independent variables (environmental, social, corporate governance, and forward looking disclosures). With p-values of 0.000 and 0.0433 for the models ROE and NAPS, respectively, the analysis's findings showed that environmental disclosures significantly and favourably affect the performance of listed non-financial companies in Nigeria. Social disclosures had negative p-values in both NAPS and ROE (0.0113 and 0.1310, respectively). However, corporate governance was statistically significant in ROE but negligible in NAPS. Additionally, with p-values of 0.0000 and 0.0230 for ROE and NAPS, respectively, the study demonstrated that forward-looking information positively and significantly impacted the performance of quoted non-financial firms in Nigeria. The study concludes that non-financial information disclosure has a mixed effect on the financial performance of quoted firms in Nigeria's non-financial services sector. It recommends regulatory standardization for forward-looking disclosures. Furthermore, investors are advised to consider future investment projections alongside financial statements to gain a comprehensive understanding of a firm's future outlook.
 Keywords: Non-financial information disclosures, Performance, Non-financial firms, Return on Equity, and Net Assets per Share.

The Role of Forward-Looking Disclosure in the Relationship of R&D Expenditure and Firm Value: Testing Agency and Signaling Theories

This study aims to examine the effect of Research and Development (R&D) expenditure on firm value with forward-looking disclosure as a moderating variable. This study used a sample of 124 manufacturing companies listed on the Indonesia Stock Exchange (IDX) in 2019 2022. Data analysis used panel data regression. The results showed that R&D expenditure has a positive effect on firm value. However, this study found that forward-looking disclosure does not moderate the relationship between R&D expenditure and firm value.

Forward-looking disclosure and short-term liabilities: evidence from Oman

Forward-looking disclosure and short-term liabilities: evidence from Oman

Forward-looking disclosure and short-term liabilities: evidence from Oman

Forward-looking disclosure and short-term liabilities: evidence from Oman

Forward-looking disclosure tone in the chairman’s statement: obfuscation or truthful explanations

PurposeThis study aims to examine the impact of a firm’s financial performance on forward-looking disclosure (FLD) tone and assess whether managers are engaging in impression management or providing truthful explanations when their companies have good or poor performance.Design/methodology/approachThis study used the content analysis method to measure the tone of FLD in the chairman’s statements of Omani financial institutions for the period 2014–2018. Regression analysis is then used to test the research hypotheses.FindingsThe authors found that good-performing firms are disclosing more good news, whereas poor-performing firms disclose more bad news. The results provided evidence that managers in Oman are providing truthful explanations in their narratives.Practical implicationsThis study offered interesting policy and practical implications for policymakers, managers and stakeholders. This paper provided insights to policymakers regarding the FLD tone practices used in the chairman’s reports in Oman. Policymakers should be aware of the importance of the chairman’s reports in the eye of multiple stakeholders and, therefore, need to set guidelines on the type and quality of non-financial voluntary information that should be disclosed in such reports in the context of emerging economies. For academics, evidence has been provided by this study’s results regarding the impact of corporate performance on disclosure tone.Originality/valueThis study offered a novel contribution to disclosure studies by being the first to examine the performance-disclosure narrative tone relation, in the context of Oman.

CEO Political Ideology and Voluntary Forward-Looking Disclosure

Abstract This study investigates whether the management earnings forecasts of Republican and Democratic CEOs differ due to systematic differences in their information disclosure preferences. We find that Republican CEOs prefer a less asymmetric information environment than Democrat CEOs, and thus make more frequent, timelier, and more accurate disclosures than Democrat CEOs. Results using the propensity score matched sample and difference-in-differences analysis show that our results are unlikely to be driven by potential endogeneity. Our results are robust to controlling for various CEO characteristics and are stronger for firms with higher levels of institutional ownership and litigation risk.

Customers’ managerial expectations and suppliers’ asymmetric cost management

This paper investigates how managers in the upstream firm (i.e., supplier) adjust their allocations of cost resources in response to managerial expectations of the downstream firms (i.e., customers) on the future demand and prospects. We conduct an empirical analysis to examine the impact of the tone of customers’ forward‐looking disclosures (FLDs) contained in the Management Discussion and Analysis section of 10‐K filings on suppliers’ asymmetric cost behaviors, characterizing costs decreasing less for sales fall than increasing for equivalent sales rise (i.e., “cost stickiness”). We show that the degree of suppliers’ asymmetric cost management is positively associated with their customers’ tone of FLDs. Moreover, such an association is stronger when the suppliers produce more unique products for their major customers. Our inferences remain robust after controlling for the strategic disclosure behavior of the customer firms, ruling out an alternative mechanism of suppliers’ own managerial expectations and managerial empire‐building incentives. Lastly, using a decision made by the U.S. Supreme Court in 2005 as a quasi‐natural experiment setting, we show that the effect of customers’ tone of FLDs on suppliers’ cost stickiness becomes stronger when FLDs are more informative. To the best of our knowledge, this paper is the first to introduce cost stickiness in the operations management context to capture management's operational decision intervention regarding resource allocation. We also contribute to information sharing literature by highlighting the importance of channels other than the traditional explicit information sharing channel in obtaining demand‐relevant information in supply chains.

Busy audit committee directors and corporate narrative disclosure in Oman

PurposeThis study aims to examine whether, and which type of, busy audit committee (AC) directors affect the quality and quantity of forward-looking disclosure (FLD).Design/methodology/approachThe authors use content analysis to measure the quality and quantity of FLD. The authors use a sample of Omani financial institutions listed on the Muscat Securities Market for the period 2014–2018.FindingsThe authors find that overlapped AC chairs and total overlapped AC directors negatively (positively) affect disclosure quantity (quality). The authors also find that overlapped AC directors with financial expertise and those with multiple directorships positively affect disclosure quantity and quality.Originality/valueThis study offers new insights to policymakers (and managers) as it informs them about the benefits of overlapping AC directorship. It suggests that corporate governance codes should not limit overlapped AC direcotorship.

Disclosure of Organizational Ambidexterity Activities and Earnings Quality in Oman

Purpose: This study examines the association between organizational ambidexterity disclosure (OAD) and earnings quality (EQ) in terms of earnings persistence (PER) and value relevance (VR). Theoretical framework: Organizational ambidexterity disclosure (OAD) is one type of forward-looking disclosure (FLD) which includes all information about exploration and exploitation activities. In accounting, the study is interested in how (OAD) affects the firm’s earnings quality. Design/methodology/approach: This study uses the secondary data of non-financial industrial and services firms listed on the Muscat Securities Market (MSX) in Oman for a 5-year period from 2017–2021. The study uses generalized least square (GLS) and feasible general least squares (FGLS) regressions to test the hypotheses and find the results. Findings: Results of the GLS and the robust results of FGLS show that OAD has a positive and significant effect on earnings persistence (PER) and value relevance (VR) and the coefficient of VR is stronger than the coefficient of PER, indicating the importance of OAD on the earnings quality as new evidence in the area of accounting. Research Implications: The results provide crucial implications for researchers, investors, policy makers and managers. The study provides potential leverage points for those responsible for shaping the disclosure and transparency because of it insights on when OAD impacts EQ. Originality/value: This study offers a novel resource-based perspective to explain how Omani firms achieve higher sustainable and value relevance earnings by investing in OA. It also provides new evidence about how an ambidextrous firm improves the sustainable and value relevance earnings.

Firm characteristics and forward-looking disclosure: the moderating role of gender diversity

PurposeThe purpose of this study is to examine the impact of firm financial and operational characteristics on the level of forward-looking information disclosure (FLID) by Egyptian-listed non-financial companies. The present research also aims to investigate the moderating role of gender diversity on the board of directors.Design/methodology/approachThe sample incorporates the non-financial companies included in the EGX 100 of the Egyptian Stock Exchange (ESE), whose reports were available during the study period from 2013 to 2018. The final sample comprises 49 companies with 294 observations. Statistical analysis is performed using multiple regression analysis.FindingsThis study found a significant positive impact of return on assets, leverage, company size and age on the level FLID, while external audit firm type and industry were found to impact the level of FLID negatively. Further, the board gender diversity (BGD) is found to have a moderating impact as it strengthens the effect of financial and operational characteristics on the level of FLID.Practical implicationsThe present study has some implications for Egyptian companies, investors in the Egyptian market and regulators in emerging economies, which include paying more attention to BGD when selecting the board members by companies as well as following up the female representation in all the listed companies by regulators.Originality/valueTo the best of the authors’ knowledge, this is the first study to investigate the moderating role of BGD and its impact on the level of FLID in emerging markets. This extends the disclosure literature as the present study brings new evidence from an emerging market regarding BGD moderating role as early research concentrated on the direct impact of BGD on the level of FLID.

Determinan Forward-Looking Disclosure Pada Perusahaan Manufaktur

The purpose of this research is to analyze the determinants of forward-looking disclosure, such as gender diversity, board size, independent board composition, profitability, firm size, and leverage. This research was conducted by using 287 samples of manufacturing companies listed on the Indonesia Stock Exchange during the period of 2017-2019, using purposive sampling method and processed using multiple regression analysis what helped by EViews 11 software. The results showed that the variables gender diversity, firm size, and leverage had a significant effect on forward-looking disclosure. The implication of this research is the need for careful consideration in applying forward-looking disclosure related to the risk and certainty of the information disclosed, one of which is by reducing the liabilities held to reduce the risks held, but there is a need to increase the application of forward-looking disclosure as a means of communication with stakeholders and to get funding sources.

Narrative forward-looking information disclosure, do ownership concentration, boardroom gender diversity and cultural values matter? A cross country study

PurposeThis study aims to identify the main factors that drive the differences in the levels of forward-looking information disclosure (FLID) across four countries. This study goes beyond the firm-specific characteristics to the countries-specific factors to explain the observable differences in the level of FLID among the UK, Italian, Hong Kong and Chinese American Depositary Receipts (ADRs) firms trading in US Exchanges.Design/methodology/approachTo validate the levels of FLID, corporate financial information environment (CFIE)-final reports structure extractor (FRSE) was conducted on the annual reports of a sample of 353 listed firm observations in 2020 across four different countries. Also, the ordinary least square regression model was used to examine the proposed relationships.FindingsThe empirical results indicate that the level of FLID is highest among the Chinese ADRs firms trading in US Exchanges and UK listed firms. Also, ownership concentration and gender diversity have a positive correlation with the level of FLID. Additionally, long-term orientation positively influences the level of FLID. Considering the moderation effect of power distance and masculinity dimensions, countries with larger power distance tend to have a lower impact of ownership concentration on the level of FLID, whereas countries with higher masculinity tend to have a lesser positive relationship between gender diversity and the level of FLID.Originality/valueNotwithstanding, this study provides novel and persuasive evidence regarding the effects of firm- and country-specific characteristics as possible determinants of forward-looking disclosures, drawing on evidence from international companies with free floats, boards with female quotas and cultural values including masculinity and long-term orientation. This work offers unique insights from the upper echelons lens, which implies that firms need to obtain a critical mass of gender diversity to achieve a more balanced forward-looking perspective on their annual reports.

Politically Connected Firms and Forward-Looking Disclosure in the Era of Oman Vision 2040

Oman Vision 2040 is the blueprint for Oman’s future aspirations. This vision is set with a number of high-level long-term targets to reflect the desired progress towards the strategic goals, in order to direct all Omani companies to build productive strategies and innovative plans to diversify the country’s economy and reduce the dependence on the oil sector. All Omani companies are required to move according to this path by disclosing forward-looking information and goals in their annual reports. The progress will be monitored by the Vision 2040 Follow Up Unit which will report regularly on the targets. Therefore, our paper examines whether the presence of ruling family members on boards of directors impacts the quality and tone of forward-looking disclosure (FLD). Based on the sample of 34 Omani financial listed firms on Muscat Stock Exchange between 2014 and 2020, we found that there is a positive and significant association between politically connected firms and FLD quality. This confirms prior literature that politically connected firms are considered more transparent than their non-connected peers. We also found that firms with ruling family board members disclose more good forward-looking news in the chairman’s statements. Furthermore, in the case of poor financial performance firms, we found that ruling members tend to disclose more good news than bad news, and they could use impression management techniques to avoid the negative attraction and to maintain their reputation in the market. From these findings, we draw important implications for policymakers and shareholders who need to encourage firms to appoint ruling family directors on their boards (to a specific extent) due to the potential beneficial outcomes they deliver.