Do forward-looking narratives affect investors' valuation of UK FTSE all-shares firms?
Do forward-looking narratives affect investors' valuation of UK FTSE all-shares firms?
Narrative reporting is an important avenue for investors to know more about a company from the eyes of its board of directors. This study aims to examine the impact of forward-looking disclosures on the values of UK FTSE all-shares non-financial firms. It uses a sample of annual report narratives from 2005 to 2014 to determine that the values of UK FTSE all-shares firms are positively influenced by the disclosure of forward-looking information. Besides, after distinguishing between high and low-performing firms, the study finds that forward-looking disclosures have no effect on the values of high-performing firms, though they positively enhance investors’ valuation of low-performing firms. Furthermore, the study concludes that when UK firms are divided based on the size of the audit firm (Big 4 vs. non-Big 4 auditors), forward-looking disclosures only positively affect the values of FTSE all-shares firms that are audited by one of the Big 4 auditing firms. Therefore, the results suggest that forward-looking information in UK narrative reporting statements is seen as credible for firms that are audited by a large auditor and/or are low-performing.
Narrative Reporting; Forward-Looking Information; Firm Value; UK
493-519
Hassanein, Ahmed
cf0590df-ab6b-49e7-959a-7b29e3f3789a
Zalata, Alaa
0fc2c56d-97ad-44ce-ab31-63ca335dcef6
Hussainey, Khaled
911713cd-6bbd-4bb9-8274-d491c7c96929
February 2019
Hassanein, Ahmed
cf0590df-ab6b-49e7-959a-7b29e3f3789a
Zalata, Alaa
0fc2c56d-97ad-44ce-ab31-63ca335dcef6
Hussainey, Khaled
911713cd-6bbd-4bb9-8274-d491c7c96929
Hassanein, Ahmed, Zalata, Alaa and Hussainey, Khaled
(2019)
Do forward-looking narratives affect investors' valuation of UK FTSE all-shares firms?
Review of Quantitative Finance and Accounting, 52 (2), .
(doi:10.1007/s11156-018-0717-6).
Abstract
Narrative reporting is an important avenue for investors to know more about a company from the eyes of its board of directors. This study aims to examine the impact of forward-looking disclosures on the values of UK FTSE all-shares non-financial firms. It uses a sample of annual report narratives from 2005 to 2014 to determine that the values of UK FTSE all-shares firms are positively influenced by the disclosure of forward-looking information. Besides, after distinguishing between high and low-performing firms, the study finds that forward-looking disclosures have no effect on the values of high-performing firms, though they positively enhance investors’ valuation of low-performing firms. Furthermore, the study concludes that when UK firms are divided based on the size of the audit firm (Big 4 vs. non-Big 4 auditors), forward-looking disclosures only positively affect the values of FTSE all-shares firms that are audited by one of the Big 4 auditing firms. Therefore, the results suggest that forward-looking information in UK narrative reporting statements is seen as credible for firms that are audited by a large auditor and/or are low-performing.
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Accepted/In Press date: 27 February 2018
e-pub ahead of print date: 8 March 2018
Published date: February 2019
Keywords:
Narrative Reporting; Forward-Looking Information; Firm Value; UK
Identifiers
Local EPrints ID: 418433
URI: http://eprints.soton.ac.uk/id/eprint/418433
ISSN: 0924-865X
PURE UUID: fcb9704e-5471-430f-ab79-f7fd70fd7f56
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Date deposited: 08 Mar 2018 17:30
Last modified: 16 Mar 2024 06:16
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Author:
Ahmed Hassanein
Author:
Khaled Hussainey
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