Do shareholders read annual reports or not?

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Abstract

The purpose of this paper is to explore who uses narrative reporting information contained within online corporate annual reports and assess the relative use of different types of narrative information. Based on the popularity of that phrase in recent years, a strong connection between accounting and private shareholders is acknowledged. Our primary research question can be stated as follow: Do shareholders read annual reports or not? It is a connection that private shareholders need to recognize and understand. A private shareholder does not distribute its surplus funds (margin) to owners but instead uses them to help pursue its mission. In fact, private shareholders do not have any owners or stockholders. Therefore, one might conclude that accounting becomes a secondary concern of the private shareholder compared to carrying out the mission.

Table of Contents

DO SHAREHOLDERS READ ANNUAL REPORTS OR NOT?3

Objectives of the Study3

Motivation for the study4

Literature Review6

External Reporting7

Current Month Actual Versus Budget9

Current Year-to-Date (YTD) Actual Versus Budget9

Responsibility Reports9

Cash Management Reports10

Methodology10

Summary11

REFERENCES13

Do shareholders read annual reports or not?

Objectives of the Study

The major aim of this research is to explore that whether or not private shareholders uses narrative reporting information contained within online corporate annual reports and assess the relative use of different types of narrative information.

Motivation for the study

Private shareholders often do not have the resources to hire a full-time employee with accounting expertise. These shareholders must find cost-effective ways to fulfill their fiscal responsibilities. Some private shareholders hire an outside party, such as an accounting firm or bookkeeper, on a part-time basis to handle the accounting. Others rely on a board member to provide high-level financial expertise. The important thing is that the private shareholders makes sure that a knowledgeable person takes financial responsibility, and there is proper oversight of this function by its leader. The research is intended to provide a very basic overview of the nitty gritty topic (Bartlett, 1997,pp. 247).

The provision of narrative reporting information responds to concerns from user groups that annual reports and particularly financial statements do not provide sufficient information to enable them to understand the performance and position of modern companies, developed within a traditional-manufacturing environment, fails to capture the risks, opportunities and interdependent organisational relationships of businesses operating in modern, increasingly knowledge-based environments. For example, Holland (2004) argues that the growth of intangibles has led to changes in the value creation process, and the significance of intangibles has exacerbated the information asymmetry between companies and the providers of capital.

Many commentators have called for a broadening of the reporting model: from a focus on disclosing financial statement data to providing a wider array of financial and non-financial information to aid decision making. Hence, narrative reporting has developed as an outlet for management to disclose present- or future-orientated information demanded by those users seeking to appraise strategy, management quality and firm-specific intangibles (Bartlett, 1997,pp. 254).

Historically, while a director's report has been required to accompany the company accounts lay before shareholders, other voluntary narratives such as the chairman's statement have ...