The tone of business model disclosure: an analysis of integrated reports of public sector entities

Mahomed, Suhail
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Orientation: State owned entities have recently come under scrutiny because of constant failure to ensure profitability and for corruption scandals. Examples of this can be seen through state capture corruption scandals which have been brought forward through to the Zondo Commission. Such corruption scandals have placed doubt in the minds of the public regarding the validity of integrated reports. This has called for increased accountability within the public sector. One solution to bringing about this accountability is through integrated reporting. Within the integrated report, the business model disclosure is qualitative disclosure describing how entities create value by utilising resources which is a useful component within the integrated report. However, the use of impression management strategies in business model disclosure in order to promote an entity’s corporate image has been raised as a concern by prior researchers. More specifically, the use of thematic manipulation has been extensively researched. Research purpose: The purpose of this study is to establish whether entities within the public sector adopt impression management strategies by manipulating the tone of the business model disclosure provided in their integrated reports. Significance of study: Integrated reports contain narrative disclosures. These disclosures are subject to possible hidden manipulation and may influence users’ decisions. In assessing whether impression management techniques are used, narrative disclosure analysis have given an indication whether these business models and more so the integrated reports themselves convey true information. The study contributes to the effective disclosure of business models within a South African context. Public regulatory bodies may find this study useful in assessing whether public entities concisely disclose business models. Overview of research method: The study made use of a quantitative approach in terms of research methodology even though the data was qualitative in nature. Each sentence within the business model disclosure of public sector entities was analysed. More specifically, only schedule 2 and 3A public sector entities were observed in this study. The research design consisted of three phases. These being a content analysis, a univariate analysis and a multi-variate analysis. Main findings: This study found that majority of disclosure in terms of business models were found to be using a non-positive tone which indicates that is no manipulation of tone through the adoption of impression management techniques. This was in line with a study performed in the private sector in a South African context (Moloto, 2019). Furthermore, the results found that there is an association between tone and other categories of disclosure (i.e. type, time and topic). Finally, when testing tone in relation to a set of disclosure variables relating to corporate governance (number of board of directors), performance (declining return on equity) and disclosure verifiability (positive tone being associated with qualitative and forward looking disclosure), it was found that there were significant statistical relationships between a more positive tone and all such disclosure variables
A research report submitted to the Faculty of Commerce, Law and Management at the University of the Witwatersrand in partial fulfilment of the requirements for the degree of a Masters in Commerce (Accountancy), 2021
UCTD, , Business mode, Impression management, tone, Integrated reporting