Academic journal article Academy of Accounting and Financial Studies Journal

The Determinants of Forward-Looking Information Disclosure in Annual Reports of Lebanese Commercial Banks

Academic journal article Academy of Accounting and Financial Studies Journal

The Determinants of Forward-Looking Information Disclosure in Annual Reports of Lebanese Commercial Banks

Article excerpt


As a critical source of disclosure, forward-looking information (FLI) has been receiving an increasing consideration in recent disclosure research (Menicucci and Paolucci, 2017). It is believed that the current role of forward-looking information disclosure (FLID) in economic environment is thus crucial since the dynamic progress of economic conditions along with the economic development highlights the potential insufficiencies of historical disclosure in fulfilling investors' variegated information needs (Mathuva, 2012). Thus, the insufficiency of historical disclosure raises the need for FLID that yields investors with the needed information to make informed decisions (Menicucci and Paolucci, 2017; Mathuva, 2012).

In fact, FLID refers to providing information that allows stakeholders to assess future performance of a firm (Uyar and Kilic, 2012); this can be found in the firm chairman's report- in the voluntary narrative part of the annual report (Alkhatib, 2014). Such FLID might contain both financial predictions of the firm, such as cash flows, revenues prediction, and sales volume (Alkhatib, 2014; Aljifri and Hussainey, 2007). As well as non-financial predictions of the firm, such as factors that may influence the firm's future performance as risk, future business ambiguity, analysis and evaluation, agency relationship, operations, and general significant information about the firm (Uyar and Kilic 2012; Aljifri and Hussainey, 2007; Celik et al., 2006).

Hence, there are numerous arguments about the benefits of including FLID in annual reports. For instance, Alkhatib (2014; 2012) argued that FLID lessens asymmetry of information between shareholders and firms, which aid interested users making better-informed investment decisions. Aljifri and Hussainey (2007) also claimed that the lack of FLID might guide investors to base their predictions on imprecise information from other sources. In addition, Beretta and Bozzolon (2004) suggested that the disclosure of FLI could enrich financial reporting and enhance the annual report.

Contrary to the benefits of providing FLID in the annual reports, preceding researchers have provided some opinions against the inclusion of them. For instance, Aljifri and Hussainey (2007) argued that, related to the future, there is uncertainty that might be difficult to be precisely expected, and this imprecision might lead the firms to lawsuit. Moreover, Healy and Palepu (2001) revealed that FLID might provide beneficial information to competitors and, henceforth, might influence the competitive position of the firm in product markets.

Despite its significance for numerous stakeholders, this type of information has, somewhat, less or the slightest disclosure rate among other disclosure areas (Uyar and Kilic, 2012; Elsayed and Hoque, 2010; Patelli and Prencipe, 2007). A very limited number of research have investigated the influence of firm characteristics on the disclosure of FLI in the developing countries and even scarcer, such research may be found in Middle Eastern countries (Zhafarina, 2017; Aljifri and Hussainey, 2007).

However, empirical evidence about the impact of firm-specific characteristics on this type of disclosure is uncertain and frequently fails to provide conclusive results (Mathuva, 2012; Donnelly and Mulcahy, 2008). On the other hand, only a relatively small number of research studies have addressed issues related to FLID by banks. Hence, a gap exists in the literature; consequently, a research to convey insights regarding this spring of research specifically in developing countries in general and in Lebanon in particular- where this issue has not been explored- is needed.

Therefore, this research is consequently designed to fill this research gap by empirically investigating the specific characteristics that may affect the extent of FLI disclosed in the narrative sections chairmen's letters of the annual reports of Lebanese commercial banks for the period 2008-2017. …

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