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 nonfinancial 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.
Professor Khaled Hussainey, Professor of Accounting and Financial Management, University of Portsmouth
Professor Khaled Hussainey completed his PhD in Accounting and Finance at the University of Manchester in 2004, and since then he has held academic positions at Plymouth University; Stirling University, Manchester University, and Ain Shams University, before joining the University of Portsmouth as a Professor of Accounting and Financial Management in August 2016.
Khaled Has published more than 70-refereed papers in academic journals and international conferences proceedings. His research provides a cohesive and major contribution to corporate reporting and corporate finance literature. He has been awarded the prestigious 2007 Best Paper Award of the British Accounting Review for my paper “Loss firms' annual report narratives and share price anticipation of earnings’ & the prestigious 2012 Best Paper Award of the Journal of Risk Finance for his paper “Revisiting the capital structure puzzle: UK evidence”.
Khaled has been active in attracting research-funded projects. He has received £60,000 from the Economic and Social Research Council (ESRC); £7,500 from the British Academy; £2000 from Plymouth University and $120,000 from Qatar National Research Foundation (QNRF).
He is currently a Co-Editor-in-Chief of Journal of Financial Reporting and Accounting; an Associate Editor for Journal of Applied Accounting Research and International Journal of Accounting, Auditing and Performance Evaluation.
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