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Complementary narrative commentaries of statutory accounts in annual reports of UK listed companies

Complementary narrative commentaries of statutory accounts in annual reports of UK listed companies
Complementary narrative commentaries of statutory accounts in annual reports of UK listed companies
This paper, for the first time, classifies narrative information into complementary and supplementary. For the purpose of the paper, complementary narrative information is defined as that information which refers to specific numbers presented in the statutory accounts (profit and loss and balance sheet). Non-specific narrative information is classified as supplementary. Having made the distinction and provided reasons for such a distinction the study investigates the extent of complementary narrative commentaries on numbers from the statutory accounts. The study also investigates which company-specific characteristics are associated with the extent of complementary narrative commentaries. An index consisting of 46 items which must be reported in the statutory accounts was used to measure the extent of complementary narrative commentaries in the annual reports of 170 listed UK companies. The findings suggest that, on average, the companies comment on 39.9% of the numbers appearing in their statutory accounts. Using the Ordinary Least Squares (OLS) regression model, the results indicate that company size, gearing, profitability, liquidity ratio, the presence of exceptional items, and substantial institutional investment are significantly associated with the extent of complementary narrative commentaries. However, auditor type, directors’ share ownership, and the proportion of non-executive directors are not significantly associated with the extent of complementary narrative commentaries. The research has important implications for accounting regulators, users of annual reports and future research into the usefulness narrative information provided in annual reports.
0967-5426
71-107
Tauringana, Venancio
27634458-b041-4bc1-94da-3e031d777e4f
Mangena, Musa
c2c0772e-582d-47af-8bba-2cce06aa7a2f
Tauringana, Venancio
27634458-b041-4bc1-94da-3e031d777e4f
Mangena, Musa
c2c0772e-582d-47af-8bba-2cce06aa7a2f

Tauringana, Venancio and Mangena, Musa (2006) Complementary narrative commentaries of statutory accounts in annual reports of UK listed companies. International Journal of Management Accounting Research, 8 (2), 71-107. (doi:10.1108/96754260680001050).

Record type: Article

Abstract

This paper, for the first time, classifies narrative information into complementary and supplementary. For the purpose of the paper, complementary narrative information is defined as that information which refers to specific numbers presented in the statutory accounts (profit and loss and balance sheet). Non-specific narrative information is classified as supplementary. Having made the distinction and provided reasons for such a distinction the study investigates the extent of complementary narrative commentaries on numbers from the statutory accounts. The study also investigates which company-specific characteristics are associated with the extent of complementary narrative commentaries. An index consisting of 46 items which must be reported in the statutory accounts was used to measure the extent of complementary narrative commentaries in the annual reports of 170 listed UK companies. The findings suggest that, on average, the companies comment on 39.9% of the numbers appearing in their statutory accounts. Using the Ordinary Least Squares (OLS) regression model, the results indicate that company size, gearing, profitability, liquidity ratio, the presence of exceptional items, and substantial institutional investment are significantly associated with the extent of complementary narrative commentaries. However, auditor type, directors’ share ownership, and the proportion of non-executive directors are not significantly associated with the extent of complementary narrative commentaries. The research has important implications for accounting regulators, users of annual reports and future research into the usefulness narrative information provided in annual reports.

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More information

Published date: 2006
Organisations: Centre of Excellence for International Banking, Finance & Accounting

Identifiers

Local EPrints ID: 405359
URI: http://eprints.soton.ac.uk/id/eprint/405359
ISSN: 0967-5426
PURE UUID: b6efc69e-7b54-4cf9-9753-9f4643cff3bb
ORCID for Venancio Tauringana: ORCID iD orcid.org/0000-0002-1433-324X

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Date deposited: 07 Feb 2017 16:45
Last modified: 16 Mar 2024 03:58

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Author: Musa Mangena

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