Essays on Corporate Disclosure of Value Creation
Creators: name: Rawsthorne, Sam
Publisher: name: Lancaster University
Year: 2024

description: Information on a firm’s business model helps investors understand an
 entity’s resource requirements, priorities for action, and prospects
 (FASB, 2001, pp. 14-15; IASB, 2010, p. 12). Disclosures of strategy and
 business model (SBM) are therefore considered a central element of
 effective annual report commentary (Guillaume, 2018; IIRC, 2011). By
 applying natural language processing techniques, I explore what SBM
 disclosures look like when management
 
 are pressed to say something, analyse determinants of cross-sectional
 variation in SBM reporting properties, and assess whether and how managers
 respond to regulatory interventions seeking to promote SBM annual report
 commentary. This dissertation contains three main chapters. Chapter 2
 presents a systematic review of the academic literature on non-financial
 reporting and the emerging literature on SBM reporting. Here, I also
 introduce my institutional setting. Chapter 3 and Chapter 4 form the
 empirical sections of this thesis. In Chapter 3, I construct the first
 large sample corpus of SBM annual report commentary and provide the first
 systematic analysis of the properties of such disclosures. My topic
 modelling analysis rejects the hypothesis that such disclosure is merely
 padding; instead finding themes align with popular strategy frameworks and
 management tailor the mix of SBM topics to reflect their unique approach
 to value creation. However, SBM commentary is less specific, less precise
 
 about time horizon (short- and long-term), and less balanced (more
 positive) in tone relative to general management commentary. My findings
 suggest symbolic compliance and legitimisation characterize the typical
 annual report discussion of SBM. Further analysis identifies proprietary
 cost considerations and obfuscation incentives as key determinants of
 symbolic reporting. In Chapter 4, I seek evidence on how managers respond
 to regulatory mandates by adapting the properties of disclosure and
 investigate whether the form of the mandate matters. Using a
 differences-in-differences research design, my results suggest a modest
 incremental response by treatment firms to the introduction of a comply or
 explain provision to provide disclosure on strategy and business model. In
 contrast, I find a substantial response to enacting the same requirements
 in law. My analysis provides clear and consistent
 
 evidence that treatment firms incrementally increase the volume of SBM
 disclosure, improve coverage across a broad range of topics as well as
 providing commentary with greater focus on the long term. My results point
 to substantial changes in SBM reporting properties following regulatory
 mandates, but the form of the mandate does matter. Overall, this
 dissertation contributes to the accounting literature by examining how
 firms discuss a central topic to
 
 economic decision making in annual reports and how firms respond to
 different forms of disclosure mandate. Furthermore, the results of my
 analysis are likely to be of value for regulators and policymakers
 currently reviewing or considering mandating disclosure requirements. By
 examining how companies adapt their reporting to different types of
 regulations, this study provides an empirical basis for recalibrating SBM
 disclosure mandates, thereby enhancing the information set of capital
 market participants and promoting stakeholder engagement in a landscape
 increasingly shaped by non-financial information.