A comparison of non-financial strategy disclosure in the annual reports of Brazilian and Portuguese listed companies

Malavoloneque, Anita
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Over the past number of years, corporate entities have been heavily criticised by both academic researchers and practitioners. This is due to a perception that its financial reports have failed to reflect an organisation's ability to create value over the long-term. International scandals such as the collapse of the Portuguese Bank of Business (Banco Português de Negócios), along with recent fraudulent allegations involving Brazil’s biggest state-owned oil company Petrobras, have further led various stakeholders to question the moral compass of business leaders and to request more leading information to be divulged in the annual reports, other than complex financial reporting rules. Consequently, over the past two decades, there has been a shift in reporting with more focus being placed on the qualitative aspects of the annual reports. Strategy disclosures are important for they don’t only ensure that investors have access to the necessary information which may impact their decision-making process, but further ensure that there is consensus regarding an entity’s future prospects. Given that research on strategy disclosures is rather limited, this study analysed the extent to which Brazilian and Portuguese listed companies disclose non-financial information with respect to strategy disclosures in their 2015 annual reports. The study also investigated the differences in the extent of disclosures between Brazilian and Portuguese listed entities. To this end, a sample of the top 40 listed companies in Brazil was selected from the Brazilian securities stock exchange (Bovespa) and a sample of the top 40 listed companies in Portugal was selected from the Portuguese stock exchange (Euronext Lisbon) based on the companies’ market capitalisation. Thereafter, the extent of non-financial strategy information disclosed in the annual reports was scored using ten rating disclosure criteria used in a Dutch study conducted by Santema and Van De Rijt (2001) and these were statistically analysed using a non-parametric statistical test (Mann–Whitney U test) to assess for the presence of a significant difference in the extent of strategy disclosures between Brazilian and Portuguese listed companies. Overall, the findings suggested that there is a significant difference in the extent of strategy disclosures in Brazilian and Portuguese markets. Brazilian listed companies were found to have rather good disclosures in their annual reports with respect to strategy. On the contrary, the study found that Portuguese listed companies have rather low disclosures with respect to strategy in their annual reports
A report submitted in partial fulfilment of the requirements for the degree Master of Commerce in Accountancy, Faculty of Commerce, Law and Management, University of the Witwatersrand, Johannesburg, 2020