Operational elements of Narrative Disclosure Information (NDI) in a geographical context
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Operational elements of Narrative Disclosure Information (NDI) in a geographical context Alexandros Garefalakis1 · Nikolaos Sariannidis2 · Christos Lemonakis3 © Springer Science+Business Media, LLC, part of Springer Nature 2018
Abstract Research on the quality of narrative information of annual financial reports has long been dominated by a lack of tools that permit an objective analysis of qualitative disclosure. This study is focused on accounting disclosure research and proposes a comprehensive index that uses Key Performance Indicators to enhance understanding of the quality of narrative information during the period of 2002–2007, using a sample of European (EU) and USA (US) firms operating in that context. We use previous research of Garefalakis et al. (Corp Ownersh Control 13(4):317–334, 2016) to underscore the relation between the Management Commentary Index and the Weighted Management Commentary Index with several explanatory variables that put emphasis on firms’ attributes regarding their volumes in total assets, their book values, as well as the use of corporate governance indicators, etc. in a regional level. Our results show that the US firms with the mandatory requirements do not provide a greater amount of disclosure information in their reporting than their counterparts in Europe (i.e. firms located in Western and Northern Europe). The proposed approach seeks to enhance understanding of the quality of companies’ narrative information disclosure and reveals a critical path to analyze the link between corporate governance and firms’ performance. Keywords Narrative disclosure · Financial reporting quality · Geographical IFRS analysis
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Christos Lemonakis [email protected] Alexandros Garefalakis [email protected] Nikolaos Sariannidis [email protected]
1
Department of Finance and Accounting, Technological Educational Institute of Crete, Heraklion, Crete, Greece
2
Department of Finance and Accounting, Technological Educational Institute of Western Macedonia, Kozani, Greece
3
Department of Business Management, Technological Educational Institute of Crete, Ag. Nikolaos Branch, Crete, Greece
123
Annals of Operations Research
1 Introduction In recent years, the business environment faces a wide range of environmental, social and corporate challenges, which has led to increased interest in corporate responsibility issues (Warren and Thomsen 2012). This requirement for environmental, social and corporate governance reporting has not come out from a unilateral corporate interest, but it has emerged from the increased awareness of both investors and stakeholders. Only until recently, the main concern of regulators and key investors was to take fair financial reporting by companies; but, during the last couple of years, the narrative report has grown considerably, and regulations and best practices have been developed to reflect this position. The regulation of narrative information has its main objective to address the information failures that may arise from the enlisted companies’
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