The financial crisis of 2007-2008 and the increasing demand for sustainability

Bachelor thesis in business administration, School of business, economics and law at Gothenburg university, Management accounting autumn 2016 Authors: Julius Fogelström Sundström & Robin Svedberg Advisor: Johan Åkesson Title: The financial crisis of 2007-2008 and the increasing demand for sustainability. How, and if so, why, have these events influenced Swedish listed large-cap firms ́ voluntary disclosure, as well as their usage of measurements and goals during the years 2007 – 2015? Background and problematization: Åkesson (2008) studied the non-regulated part of the annual report in 16 large-cap firms listed on NASDAQ Stockholm during the years 19652004, in order to describe and explain, in general, the development of financial – and nonfinancial measurements and goals. We partially continued this study, by examining mostly the same firms, but during the time-period 2007-2015, and instead of focusing on all possible explanations for the development of financial – and non-financial measurement and goals, we chose to partially study the adoption of IFRS, the financial crisis of 2007-2008 and the increased demand for sustainability ́s possible influence on the measurements and goals. Purpose: The purpose of this study is to describe, and compare, which financial – and nonfinancial goals and measurements that large-cap firms listed on NASDAQ Stockholm presented during the period of 2007-2015. After that has been done, we are going to try to explain and identify, in general, how, and why, the financial crisis of 2007-2008, and the increasing demand for sustainability has influenced/affected the development of the nonregulated part of the annual report, in the aforementioned category of companies. How, and if, the adoption of IFRS has had an impact on the volume of voluntary disclosure, will also be examined. Delimitations: We only examined large-cap Swedish companies that have been listed during the years 2007-2015, more specific, we tried to use the firms that Åkesson (2008) used in this Licentiate paper “Financial measurements and goals in public Swedish firms 1965 – 2004”. We focused exclusively on how the financial crisis in 2007-2008 and the phenomenon sustainability have influenced the design of the voluntary disclosure in Swedish large-cap firms listed on NASDAQ Stockholm, and how, and if, the adoption of IFRS has had an impact on the volume of voluntary disclosure. Method: We used two different analysis designs in this study. The first one is a data-based approach which focuses on a specific section of financial data, which in our case consist of data extracted from the non-regulatory part of the annual reports. In order to give a complementing description of the data-based approach, and to explain it, a text-based part was included in the study. This data consists of management commentaries obtained from the nonregulated part of the annual reports, as well as an interview with one of the examined firms former CFO. Results and conclusions: The financial crisis of 2007-2008 seems to have had a large impact in the usage of measurements, as well as the volume of voluntary disclosure at large. The reason for this seems to be connected to the firms’ strife of staying/becoming legitimized. The increasing demand for sustainability seems to have had a large impact on the way firms act and report. It is hard to argue that this behavior can be explained by information asymmetry theory, on the contrary, being seen as legitimate relative your competitors, seems as the more likely explanation. The adoption of IFRS seems to had no, and in some cases even a negative impact on the non-regulatory volume. The various measurement popularity in 2007 compared to 2015 has changed for all different categories of measurements. Measurements of return, employee, investments and value based have decreased in popularity, while measurements like stock, capital structure, unprocessed, and sustainability have increased in popularity. Margin measurements popularity did not change during the examined years. Suggestions for future research: One part of the studies purpose was to describe how the occurrence and the number of financialand non-financial goals and measurements changed over time in Swedish public companies` financial reports. We wondered why these changes, in both individual measurements and in the categorized measurements, occurred. Therefore, it would be interesting to try to explain the changes in popularity of these measurements in depth, instead of generally like we did in this paper. Another interesting research area would be to examine all measurements and goals that firms in Sweden have presented during the years 1965 to 2015. Then you would be able to describe the development of measurements and goals over time, and see when new measurements and goals are introduced.