Usefulness of corpotate annual report: Empirical study
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This study is based on primary research conducted on shareholders of Dhaka Stock Exchange
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Usefulness of corpotate annual report: Empirical study
- 1. WELCOME
- 2. A Study on Usefulness of Corporate Annual Reports in Bangladesh
- 3. Corporate Annual Reports Corporate annual report provided to investors is the major source that provides information on the effectiveness of the accomplishments of managers in meeting their fiduciary duties and carrying out their stewardship functions.
- 4. Country review SRI LANKA Anura De Zoysa & Kathy Rudkin Sri Lankan users depend more on annual report information than on information provided by stockbrokers, newspapers, and other media reviews. SAUDI ARABIA Abdulrahman Al- Razeen & Yusuf Karbhari (2004) The majority of the individual investors rely heavily on the stockbrokerās advice as their main source of information. JORDAN Mohammad Abu- Nassar & Brian A. Rutherford (1996) The pattern of usage of the individual report sections is broadly consistent with that in developed countries except that greater attention is given to auditorsā reports.
- 5. KUWAIT Kamal Naser, Rana Nuseibeh & Ahmed Al-Hussaini (2003) The users mainly rely mainly on the information made directly available by the company AUSTRALIA John K. Courtis (1982) The users mainly depend on the stockbrokerās advice and ranked the importance of annual reports as 3rd. QATAR Jalal M. Alattar & Khalid Al-Khater (2007) The users consider annual reports to be very important and to be the main source of information for investment decision.
- 6. Survey Response User Group Approached Responded Response Percentage (%) Investors 44 27 61 Stockbrokers 8 6 75 Total 52 33 63
- 7. Pre-Readership Consideration Finance Course or Training on Stock Market Education Level Experience
- 10. Education 33% 67% Stock Brokers Graduate/Po stgraduate of Business Graduate/Po stgraduate of Others 52%48% Shareholders Graduate/Pos tgraduate of Business Graduate/Pos tgraduate of Others
- 12. Trading Experience 67% 17% 16% Stock Brokers 1-5 years 6-10 years 11-20 years 48% 38% 14% Shareholders 1-5 years 6-10 years 11-20 years
- 14. Reading Annual Reports 40% 20% 20% 20% 0% Stock Brokers Always Usually Sometimes Rarely Never 11% 36% 39% 14%0% Shareholders Always Usually Sometime s Rarely Never
- 15. Importance of Sources of Information
- 16. Investors Sources of information Mean value Standard Deviation Mean difference t - statistic Sig. (2- tailed) Null Hypothesis Broker_advice 3.14 1.457 .138 .510 .614 Accepted FnF_advice 2.93 1.280 -.069 -.290 .774 Accepted Annual_report 4.14 .915 1.138 6.696 .000 Accepted Interim_report 3.86 .915 .862 5.073 .000 Accepted Communication_mgt 3.17 1.311 .172 .708 .485 Accepted Media_report 3.21 1.424 .207 .783 .440 Accepted Ho: Āµ ā„ 3 (Source of information is perceived as at least moderately important) H1: Āµ < 3 (Source of information is perceived as less than moderately important)
- 17. Sources of information Mean value Standard Deviation Mean difference t - statistic Sig. (2- tailed) Null Hypothesis Publication_DSE_BSEC 3.24 1.455 .241 .893 .379 Accepted Technical_analysis 2.76 1.405 -.241 -.925 .363 Accepted Info_internet 2.83 1.391 -.172 -.668 .510 Accepted Rumors 1.90 1.319 -1.103 -4.506 .000 Rejected Ho: Āµ ā„ 3 (Source of information is perceived as at least moderately important) H1: Āµ < 3 (Source of information is perceived as less than moderately important)
- 18. Stock-brokers Sources of information Mean value Standard Deviation Mean difference t - statistic Sig. (2- tailed) Decision Broker_advice 2.50 1.225 -.500 -1.000 .363 Accepted FnF_advice 2.33 1.211 -.667 -1.348 .235 Accepted Annual_report 4.17 .753 1.167 3.796 .013 Rejected Interim_report 4.50 .548 1.500 6.708 .051 Accepted Communication_mgt 3.83 .753 .833 2.712 .042 Rejected Media_report 3.67 .816 .667 2.000 .102 Accepted Publication_DSE_BSEC 3.83 .753 .833 2.712 .042 Rejected Technical_analysis 3.83 .753 .833 2.712 .042 Rejected Info_internet 2.00 1.549 -1.000 -1.581 .175 Accepted Rumors 1.17 .408 -1.833 -11.000 .000 Rejected Ho: Āµ ā„ 3 (Source of information is perceived as at least moderately important) H1: Āµ < 3 (Source of information is perceived as less than moderately important)
- 19. Rank of sources of information Investors Stock-Brokers Mean SD Rank Mean SD Rank Broker_advice 3.14 1.457 6 2.50 1.225 7 FnF_advice 2.93 1.280 7 2.33 1.211 8 Annual_report 4.14 .915 1 4.17 .753 2 Interim_report 3.86 .915 2 4.50 .548 1 Communication_mgt 3.17 1.311 5 3.83 .753 3 Media_report 3.21 1.424 4 3.67 .816 6 Publication_DSE_BSEC 3.24 1.455 3 3.83 .753 3 Technical_analysis 2.76 1.405 9 3.83 .753 3 Info_internet 2.83 1.391 8 2.00 1.549 9 Rumors 1.90 1.319 10 1.17 .408 10
- 20. How important the annual report contents are?
- 21. Investors Sources of information Mean value Standard Deviation Mean difference t -statistic Sig. (2-tailed) Null Hypothesis Company info. 3.38 1.474 .379 1.386 .177 Accepted Chairmanās review 2.24 1.272 -.759 -3.211 .003 Rejected Directorās report 2.97 1.349 -.034 -.138 .892 Accepted CG statement 3.17 1.197 .172 .775 .445 Accepted Audit comm. Report 4.03 .944 1.034 5.900 .000 Accepted Auditorsā report 4.07 1.132 1.069 5.087 .000 Accepted Balance sheet 4.62 .622 1.621 14.035 .000 Accepted Income statement 4.41 .733 1.414 10.390 .000 Accepted Changes in equity 4.34 .857 1.345 8.453 .000 Accepted Cash flow state. 3.97 1.267 .966 4.103 .000 Accepted Acc. Policy notes 3.59 1.119 .586 2.822 .009 Accepted Ho: Āµ ā„ 3 (Components of Annual Report are assumed to be at least moderately important for Investment Decisions) H1: Āµ < 3 (Components of Annual Report are assumed to be as less than moderately important for Investment Decisions)
- 22. Sources of information Mean value Standard Deviation Mean difference t - statistic Sig. (2- tailed) Null Hypothesis B/S notes 3.72 1.032 .724 3.780 .001 Accepted I/S notes 3.31 1.168 .310 1.431 .164 Accepted Cash Flow state. notes 3.31 1.004 .310 1.665 .107 Accepted Value added state. 3.17 1.104 .172 .841 .408 Accepted Environmenta l reports 2.21 1.373 -.793 -3.111 .004 Rejected Reviews 4.17 .928 1.172 6.800 .000 Accepted Essay 2.72 1.131 -.276 -1.314 .200 Accepted Ho: Āµ ā„ 3 (Components of Annual Report are assumed to be at least moderately important for Investment Decisions) H1: Āµ < 3 (Components of Annual Report are assumed to be as less than moderately important for Investment Decisions)
- 23. Components of Annual report Mean value Standard Deviation Mean difference t - statistic Sig. (2-tailed) Decision Company info. 4.00 1.265 1.000 1.936 .111 Accepted Chairmanās review 4.17 1.329 1.167 2.150 .084 Accepted Directorās report 3.83 1.329 .833 1.536 .185 Accepted CG statement 4.17 .983 1.167 2.907 .034 Rejected Audit comm. Report 4.33 .816 1.333 4.000 .010 Rejected Auditorsā report 4.50 .548 1.500 6.708 .001 Rejected Balance sheet 4.83 .408 1.833 11.000 .000 Accepted Income statement 4.67 .516 1.667 7.906 .001 Rejected Changes in equity 4.33 .816 1.333 4.000 .010 Rejected Cash flow state. 4.17 .753 1.167 3.796 .013 Rejected Stock-Brokers Ho: Āµ ā„ 3 (Components of Annual Report are assumed to be at least moderately important for Investment Decisions) H1: Āµ < 3 (Components of Annual Report are assumed to be as less than moderately important for Investment Decisions)
- 24. Components of Annual report Mean value Standard Deviation Mean difference t - statistic Sig. (2-tailed) Decision Acc. Policy notes 3.50 .837 .500 1.464 .203 Accepted B/S notes 3.83 1.329 .833 1.536 .185 Accepted I/S notes 3.67 1.506 .667 1.085 .328 Accepted Cash Flow state. notes 3.33 1.633 .333 .500 .638 Accepted Value added state. 3.50 1.517 .500 .808 .456 Accepted Environmental reports 3.33 1.366 .333 .598 .576 Accepted Reviews 4.00 .894 1.000 2.739 .041 Rejected Essay 3.17 1.169 .167 .349 .741 Accepted Stock-brokers Ho: Āµ ā„ 3 (Components of Annual Report are assumed to be at least moderately important for Investment Decisions) H1: Āµ < 3 (Components of Annual Report are assumed to be as less than moderately important for Investment Decisions)
- 25. Thoroughness
- 26. Investors Sources of information Mean value Standard Deviation Mean difference t -statistic Sig. (2-tailed) Null Hypothesis Company info. 2.21 1.114 -.793 -3.833 .001 Rejected Chairmanās review 2.69 1.137 -.310 -1.470 .153 Accepted Directorās report 2.69 1.257 -.310 -1.330 .194 Accepted CG statement 3.86 1.217 .862 3.816 .001 Rejected Audit comm. Report 3.83 1.197 .828 3.722 .001 Rejected Auditorsā report 4.21 1.013 1.207 6.413 .000 Accepted Balance sheet 3.97 .981 .966 5.298 .000 Accepted Income statement 3.79 1.114 .793 3.833 .001 Rejected Ho: Āµ ā„ 3 (Components of Annual Report are assumed to be read at least somewhat thoroughly for Investment Decisions) H1: Āµ < 3 (Components of Annual Report are assumed to be read as less than somewhat thoroughly for Investment Decisions)
- 27. Sources of information Mean value Standard Deviation Mean difference t - statisti c Sig. (2-tailed) Decision Changes in equity 3.52 1.153 .517 2.415 .023 Accepted Cash flow state. 3.34 1.111 .345 1.672 .106 Accepted Acc. Policy notes 3.59 1.119 .586 2.822 .009 Accepted B/S notes 3.14 1.246 .138 .596 .556 Accepted I/S notes 2.9310 1.03272 -.06897 -.360 .722 Accepted Cash Flow state. notes 2.9310 1.25160 -.06897 -.297 .769 Accepted Value added state. 2.0345 1.20957 -.96552 -4.299 .000 Accepted Environmental reports 3.6897 1.31213 .68966 2.830 .009 Rejected Reviews 2.5172 1.27113 -.48276 -2.045 .050 Rejected Essay 2.84. 1.23970. -.160 -.1291 .030 Rejected Ho: Āµ ā„ 3 (Components of Annual Report are assumed to be read at least somewhat thoroughly for Investment Decisions) H1: Āµ < 3 (Components of Annual Report are assumed to be read as less than somewhat thoroughly for Investment Decisions)
- 28. Components of Annual report Mean value Standard Deviation Mean difference t - statistic Sig. (2-tailed) Null Hypothesis Company info. 3.83 1.169 .833 1.746 .141 Accepted Chairmanās review 3.00 1.265 .000 .000 1.000 Accepted Directorās report 3.67 .816 .667 2.000 .102 Accepted CG statement 3.50 .837 .500 1.464 .203 Accepted Audit comm. Report 4.33 .816 1.333 4.000 .010 Rejected Auditorsā report 4.33 1.033 1.333 3.162 .025 Rejected Balance sheet 4.67 .516 1.667 7.906 .001 Rejected Income statement 4.50 .548 1.500 6.708 .001 Rejected Changes in equity 4.33 .816 1.333 4.000 .010 Rejected Cash flow state. 4.33 .816 1.333 4.000 .010 Rejected Stock-brokers Ho: Āµ ā„ 3 (Components of Annual Report are assumed to be read at least somewhat thoroughly for Investment Decisions) H1: Āµ < 3 (Components of Annual Report are assumed to be read as less than somewhat thoroughly for Investment Decisions)
- 29. Components of Annual report Mean value Standard Deviation Mean difference t - statistic Sig. (2-tailed) Null Hypothesis Acc. Policy notes 3.67 .816 .667 2.000 .102 Accepted B/S notes 3.67 1.211 .667 1.348 .235 Accepted I/S notes 3.67 1.366 .667 1.195 .286 Accepted Cash Flow state. notes 3.17 1.472 .167 .277 .793 Accepted Value added state. 3.50 1.517 .500 .808 .456 Accepted Environmental reports 3.00 1.095 .000 .000 1.000 Accepted Reviews 4.17 .983 1.167 2.907 .034 Rejected Essay 3.33 1.366 .333 .598 .576 Accepted Stock-brokers Ho: Āµ ā„ 3 (Components of Annual Report are assumed to be read at least somewhat thoroughly for Investment Decisions) H1: Āµ < 3 (Components of Annual Report are assumed to be read as less than somewhat thoroughly for Investment Decisions)
- 31. Investors Correlation T-statistic Sig. (2 tailed) Null Hypothesis Company info. .779 2.451 .021 Rejected Chairmanās review .694 .197 .846 Accepted Directorās report .714 1.548 .133 Accepted CG statement .630 2.461 .020 Rejected Audit comm. Report .719 1.095 .283 Accepted Auditorsā report .773 1.653 .109 Accepted Balance sheet .469 2.457 .020 Rejected Income statement .666 3.279 .003 Rejected Changes in equity .676 3.591 .001 Rejected Ho : Āµ1=Āµ2 (Degree of thoroughness and degree of importance of components of annual report are equal. ) H1: Āµ1ā Āµ2 (Degree of thoroughness and degree of importance of components of annual report are not the equal.)
- 32. Correlation T-statistic Sig. (2 tailed) Null Hypothesis Cash flow state. .648 2.365 .025 Rejected Acc. Policy notes .550 1.229 .229 Accepted B/S notes .702 .891 .380 Accepted I/S notes .706 1.000 .326 Accepted Cash Flow state. notes .848 3.638 .001 Rejected Value added state. .629 1.270 .214 Accepted Environmental reports .598 .796 .433 Accepted Reviews .720 2.853 .008 Rejected Essay .600 1.030 .312 Accepted Ho : Āµ1=Āµ2 (Degree of thoroughness and degree of importance of components of annual report are equal. ) H1: Āµ1ā Āµ2 (Degree of thoroughness and degree of importance of components of annual report are not the equal.)
- 33. Correlation T-statistic Sig. (2 tailed) Null Hypothesis Company info. .947 1.000 .363 Accepted Chairmanās review .250 1.581 .175 Accepted Directorās report .600 -.415 .695 Accepted CG statement .608 1.000 .363 Accepted Audit comm. Report .700 .000 1.000 Accepted Auditorsā report .707 .542 .611 Accepted Balance sheet .632 1.000 .363 Accepted Income statement .707 1.000 .363 Accepted Changes in equity 1.000 Std error of the difference was zero Rejected Ho : Āµ1=Āµ2 (Degree of thoroughness and degree of importance of components of annual report are equal. ) H1: Āµ1ā Āµ2 (Degree of thoroughness and degree of importance of components of annual report are not the equal.) Stock-brokers
- 34. Correlation T-statistic Sig. (2 tailed) Null Hypothesis Cash flow state. .868 -1.000 .363 Accepted Acc. Policy notes .878 1.000 .363 Accepted B/S notes .953 1.000 .363 Accepted I/S notes .907 .000 1.000 Accepted Cash Flow state. notes .888 .542 .611 Accepted Value added state. 1.000 Std error of the difference was zero Rejected Environmental reports .802 1.000 .363 Accepted Reviews .910 -1.000 .363 Accepted Essay .960 -1.000 .363 Accepted Ho : Āµ1=Āµ2 (Degree of thoroughness and degree of importance of components of annual report are equal. ) H1: Āµ1ā Āµ2 (Degree of thoroughness and degree of importance of components of annual report are not the equal.)
- 36. Importance of Readership Thoroughness of Readership Mean for the Shareholders Means for the Stock-brokers Mean for the Shareholders Means for the Stock-brokers Company info 3.38 4.00 2.21 3.83 Chairmanās Review 2.24 4.17 2.69 3.00 Directorās Report 2.97 3.83 2.69 3.67 CG Statement 3.17 4.17 3.86 3.50 Audit Committee Report 4.03 4.33 3.83 4.33 Auditorās Report 4.07 4.50 4.21 4.33 BS 4.62 4.83 3.97 4.67 IS 4.41 4.67 3.79 4.50
- 37. Importance of Readership Thoroughness of Readership Mean for the Shareholders Means for the Stock-brokers Mean for the Shareholders Means for the Stock-brokers Changes in Equity 4.34 4.33 3.52 4.33 CFS 3.97 4.17 3.34 4.33 Accounting Policy Notes 3.59 3.50 3.59 3.67 BS Notes 3.72 3.83 3.14 3.67 IS Notes 3.31 3.67 2.9310 3.67 CFS notes 3.31 3.33 2.9310 3.17 Value Added Statement 3.17 3.50 2.0345 3.50 Environmental Report 2.21 3.33 3.6897 3.00 Reviews 4.17 4.00 2.5172 4.17 Essays and Pictorial 2.72 3.17 2.84 3.33
- 38. Findings ļ± While collecting data, we found the stock-brokers to be more cordial and cooperating than the investors. ļ±Company information though not perceived to be much important by the investors but is somewhat read thoroughly. ļ±Environmental report is neither perceived as important nor read thoroughly. Inferences can be drawn that they are not much concerned about the company's environmental disclosure. Either they donāt have faith in the company reporting or they simply donāt care about the environmental reporting. ļ±Neither the investor nor the brokers considered audit committee report as important.
- 39. Findings ā¢ Brokers did not regard Auditors Report as important. Likewise they donāt read them thoroughly . ā¢ Rumors were found to be the least important source of information for both the investors and the brokers. ā¢ Interim reports were found to be perceived more important than annual reports as an important source of information by the brokers . ā¢ Corporate governance was not taken importantly by either parties.
- 40. Recommendations ā¢ Organizations should provide more transparent and understandable financial information through annual report which ultimately lead to take rational and sound investment decision. ā¢ Awareness should be created among general investors through various training programs and seminars. ā¢ Efficient efforts should be taken to make the annual report more reliable to the shareholders. ā¢ Purpose of maximizing shareholders value should be clearly highlighted in the annual report.