Corporate Voluntary Disclosure: Empirical Evidence from Italy and the United States
Kumar, Kamalesh, Journal of Global Business Issues
In recent years dissatisfaction with mandatory financial reporting has led investors, financial markets and other key stakeholder to demand from companies to voluntarily provide more comprehensive information about their long-term strategies and performance. The dissatisfaction with the quality and effectiveness of financial reporting has also received world wide attention from academicians (Bozzolan et al., 2003; Chen andJaggi, 2000; Eng and Mak, 2003; Eng and Teo, 1999; Francis and Shipper, 1999; Hook et al., 2002; Leuz and Verrecchia, 2000; Lev and Zarowin, 1999; Meek, et al., 1995) and regulatory and professional bodies (ACCA, 1999; Ernst and Young, 1999; ISEA, 1999; OECD, 2001; Price Waterhouse Coopers, 1999). The Financial Accounting Standard Board (FASB, 2000), as well, has on more than one occasion urged firms to engage in more voluntary communication and has stressed the importance of reporting operational indicators, forward-looking data, and intangible assets in disclosures made by companies.
The Financial Accounting Standard Board (FASB, 2000) describes "voluntary disclosures" as "information primarily outside of the financial statements that are not explicitly required by accounting rules or standards." Recent guidelines provided by FASB have encouraged companies to make such disclosures in the Management Discussion and Analysis (MDSiA) section of the annual reports. As such, voluntary disclosures involve disclosures in excess of the requirements and include accounting and other information that managers of a company deem relevant to the needs of various stakeholder groups (Meek et al., 1995).
Existing research about voluntary disclosure practices in different national contexts shows a variety of approaches that companies have taken in addressing the information needs of various stakeholder groups. Researchers have also tried to account for the differences observed in voluntary disclosures across different national contexts (e.g. Meek et al., 1995; Zarzeski, 1996). The objective of this study is to examine what sort of differences may exist in the voluntary disclosure made by companies from Italy and the US.
The framework utilized in this study classified the information presented in the voluntary disclosures made by companies into seven perspectives: investor, employee, supplier, social and environmental, internal processes, and innovation and learning.. While the first five perspectives focus on dialogue and reporting targeted at specific stakeholder groups, the last two perspectives- internal processes and innovation and learning- are related to the balanced and sustainable value creation for all the stakeholders. Next,42 key performance indicators (KPIs) were identified for each of the seven perspectives. …