The quality of Management Commentary (MC) disclosure is of perennial concern to practitioners and regulators and has recently gained the attention of investors. Research on the quality of narrative elements of the corporate report has long been hampered by a lack of unique tools to permit objective analysis of qualitative disclosures. This research provides for a first time a Management Commentary Index (Ma.Co.I) constructed by Garefalakis Alexandros for objectively evaluating the quality of narrative informations contained in the annual reports. Furthermore, the current paper use a total of 3270 annual reports of major, stock market listed companies to investigate the extent to which the implementation of International Financial Reporting Standards (IFRS) in Western Europe , Northern Europe and USA has affected the quality of narrative reporting between the periods prior (2002-2004) and after (2005-2007) the implementation of the IFRS. The present study’s conclusions indicate that this new measurement tool is an efficient and reliable method for exploring financial reporting quality.
Keywords: business reporting, disclosure quality, MC, research tools, narrative informations