Research on the quality of the narrative portion of the annual report has long been hampered by a lack of tools that permit an objective analysis of qualitative disclosure. This study is the first piece of accounting disclosure quality research that effectively bridges the two research categories (i.e.: content analysis and analyst ratings studies) for the purpose of constructing a comprehensive novel tool that uses Key Performance Indicators (KPIs) to enhance understanding of the quality of narrative information disclosure. Our results show that after the adoption of IFRS, the level of disclosure compliance with the IASB’s MCF is medium, averaging 53%. Thus, despite the continued demand for better comparability in financial reporting practices, in our sample, a large number of firms do not seem to converge toward a single set of standards for both the narrative and numerical-financial disclosure. On the other hand, the region forced to comply with mandatory requirements (e.g., the US) will not provide a greater amount of disclosure information in their MC reporting than the regions that are not required to comply with these disclosure guidelines (e.g. Western Europe and Northern Europe).
Keywords: Management Commentary, Narrative Disclosure, IFRS, financial reporting quality