The adoption of IFRS and the complementary Management Commentary Index (Ma.Co.I) in Financial Reports

Abstract

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