Board structure and supplementary commentary on the primary financial statements
Board structure and supplementary commentary on the primary financial statements
Purpose
– The purpose of this paper is to investigate the relationship between the extent and focus of supplementary narrative commentary (SNC) on amounts reported in the primary financial statements and board structure variables.
Design/methodology/approach
– The study uses the disclosure index methodology to measure the extent of SNC in annual reports of 167 FTSE 250 companies. Ordinary least squares regression analysis is employed to examine the association between the extent and focus of SNC and board structure variables.
Findings
– The findings show that the extent of SNC on amounts reported in the primary financial statements is about 30 per cent, suggesting that companies provide commentary on a small number of amounts reported in the financial statements. In terms of focus of SNC, companies provide greater SNC on amounts in the income statement relative to the balance sheet. The regression results indicate that the extent of SNC is negatively associated with board size, and positively associated with audit committee (AC) independence and financial expertise. Focus of SNC is negatively related to AC independence and finance expertise.
Originality/value
– The research contributes to both the voluntary disclosure and impression management literature streams. The findings provide evidence of the extent and focus of SNC on amounts in the financial statements. They also demonstrate that board structure variables are related to the extent and focus of SNC on amounts in primary financial statements. These findings have implications for policy makers who have responsibilities for ensuring that users of annual reports receive adequate information to make decisions.
273-290
Tauringana, Venancio
27634458-b041-4bc1-94da-3e031d777e4f
Mangena, Musa
c2c0772e-582d-47af-8bba-2cce06aa7a2f
2014
Tauringana, Venancio
27634458-b041-4bc1-94da-3e031d777e4f
Mangena, Musa
c2c0772e-582d-47af-8bba-2cce06aa7a2f
Tauringana, Venancio and Mangena, Musa
(2014)
Board structure and supplementary commentary on the primary financial statements.
International Journal of Management Accounting Research, 15 (3), .
(doi:10.1108/JAAR-11-2013-0090).
Abstract
Purpose
– The purpose of this paper is to investigate the relationship between the extent and focus of supplementary narrative commentary (SNC) on amounts reported in the primary financial statements and board structure variables.
Design/methodology/approach
– The study uses the disclosure index methodology to measure the extent of SNC in annual reports of 167 FTSE 250 companies. Ordinary least squares regression analysis is employed to examine the association between the extent and focus of SNC and board structure variables.
Findings
– The findings show that the extent of SNC on amounts reported in the primary financial statements is about 30 per cent, suggesting that companies provide commentary on a small number of amounts reported in the financial statements. In terms of focus of SNC, companies provide greater SNC on amounts in the income statement relative to the balance sheet. The regression results indicate that the extent of SNC is negatively associated with board size, and positively associated with audit committee (AC) independence and financial expertise. Focus of SNC is negatively related to AC independence and finance expertise.
Originality/value
– The research contributes to both the voluntary disclosure and impression management literature streams. The findings provide evidence of the extent and focus of SNC on amounts in the financial statements. They also demonstrate that board structure variables are related to the extent and focus of SNC on amounts in primary financial statements. These findings have implications for policy makers who have responsibilities for ensuring that users of annual reports receive adequate information to make decisions.
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More information
Published date: 2014
Organisations:
Southampton Business School
Identifiers
Local EPrints ID: 398311
URI: http://eprints.soton.ac.uk/id/eprint/398311
ISSN: 0967-5426
PURE UUID: e6fcb75c-1c82-4dea-8998-268542712684
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Date deposited: 21 Jul 2016 11:20
Last modified: 15 Mar 2024 03:31
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Contributors
Author:
Musa Mangena
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