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Do forward-looking narratives affect investors’ valuation of UK FTSE all-shares firms?

Author

Listed:
  • Ahmed Hassanein

    (Gulf University for Science and Technology (GUST)
    Mansoura University)

  • Alaa Zalata

    (Mansoura University
    University of Southampton)

  • Khaled Hussainey

    (University of Portsmouth)

Abstract

Narrative reporting is an important avenue for investors to know more about a company from the eyes of its board of directors. This study aims to examine the impact of forward-looking disclosures on the values of UK FTSE all-shares non-financial firms. It uses a sample of annual report narratives from 2005 to 2014 to determine that the values of UK FTSE all-shares firms are positively influenced by the disclosure of forward-looking information. Besides, after distinguishing between high and low-performing firms, the study finds that forward-looking disclosures have no effect on the values of high-performing firms, though they positively enhance investors’ valuation of low-performing firms. Furthermore, the study concludes that when UK firms are divided based on the size of the audit firm (Big 4 vs. non-Big 4 auditors), forward-looking disclosures only positively affect the values of FTSE all-shares firms that are audited by one of the Big 4 auditing firms. Therefore, the results suggest that forward-looking information in UK narrative reporting statements is seen as credible for firms that are audited by a large auditor and/or are low-performing.

Suggested Citation

  • Ahmed Hassanein & Alaa Zalata & Khaled Hussainey, 2019. "Do forward-looking narratives affect investors’ valuation of UK FTSE all-shares firms?," Review of Quantitative Finance and Accounting, Springer, vol. 52(2), pages 493-519, February.
  • Handle: RePEc:kap:rqfnac:v:52:y:2019:i:2:d:10.1007_s11156-018-0717-6
    DOI: 10.1007/s11156-018-0717-6
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    More about this item

    Keywords

    Narrative reporting; Forward-looking information; Firm value; UK;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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