What do managers communicate in the financial reporting to the stakeholders? A comparison between Italy and the UK from 2003 to 2008

Recently, the economic environment in which companies operate has changed considerably. Three events in particular have affected the management of listed companies: a) the increasing importance of the intangible assets; b) the IFRS adoption and the evolution of the management discussion regulation both at European and national level in the period 2003-2008; c) the world financial crisis. In this context, regulators view narrative disclosures as the key to achieving the desired step-change in the quality of corporate reporting. To satisfy the new stakeholder information needs, business reporting has to expand beyond the traditional financial reporting model towards more forward-looking information of a non-financial nature. The paper wants to study the quantity of financial disclosure in the management discussion (M&D) for each information category selected and its quality in terms of: time orientation (historical, forward-looking and intertemporal information), nature (financial, non-financial) and mode of expression (narrative, quantitative, mixed). The analysis is performed considering the 2003, 2005 and 2008 financial reports in Italy and the UK. Content analysis is the method applied. One of the main results that emerges, is that the quantity of information in the M&D decreases slightly over time. Information is mainly related to the business category, it is non-financial, narrative and historical. Little space is dedicated to forward-looking information, particularly in Italy.