Authors: Alexandros Garefalakis, Augustinos Dimitras

Title: How Narrative Reporting changed the Business World: Providing a novel measurement tool

Abstract

The quality of Management Commentary (MC) disclosure is of perennial concern to practitioners and regulators but only recently gained the appropriate attention of investors. Research on the quality of narrative portion of the Annual report has long been hampered by a lack of tools to permit objective analysis of qualitative disclosures.

The novel of this research is multidimensional. First, focuses primarily on disclosure quality research which investigates a part of content analysis studies and the analyst ratings. Likewise, there is no prior research which is analyzed in such detail the Management Commentary Framework (MCF) over such a wide transition period from 2002 to 2007, across such a wide range of 3,254 annual reports, 524 firms and 13 countries.

Our results show that after the adoption of IFRS the level of disclosure compliance to the IASB’s MCF is medium, ranging from 11% to 78%, averaging 53%. On the other hand, the region forced to comply with mandatory requirements (e.g. the US) will not provide a greater amount of disclosure information in their MC reporting, that the Regions that are not obliged to comply with these disclosure guidelines (e.g. Western Europe and Northern Europe).