THE TONE OF ANNUAL REPORTS AS A STRATEGIC PERFORMANCE MANAGEMENT TOOL: APPLICATION ON TURKEY’S BORSA ISTANBUL CORPORATE GOVERNANCE INDEX FIRMS

Year 2016, Volume: 3 Issue: 3, 209 - 221, 30.09.2016

Eyup Kahveci

https://doi.org/10.17261/Pressacademia.2016321989

Abstract

The annual reports have been identified as
one of the key corporate governance practice. If these reports are genuinely
being prepared in an attempt to improve the clarity of communication with
stakeholders, and give related and necessary information accurately to them,
then they become one of the strategic tools affecting performance positively.
Therefore, in this study, we aimed a semantic examination of the English
versions of annual reports from companies quoted on Borsa Istanbul included in
the Corporate Governance Index to see whether the annual reports' tone has an
impact on company performance. With this aim, the contents of 2014 annual
reports are analyzed by the text-analysis software package Diction 7 and scores
for accomplishment, cooperation, activity and optimism are obtained. Efficiency
scores are calculated by Data Envelopment Analysis to evaluate to what extent
annual reports’ tone and corporate governance ratings impact on company
performance. The results show that the annual reports' tone and corporate
governance ratings have a significant positive impact on efficiency scores, so
on performances of companies.

Keywords

Corporate governance, DEA efficiency, annual reports, content analysis

References

• Botosan, C.A., (1997). Disclosure level and the cost of equity capital. The Accounting Review, 72 (3), 323-349.
• Branco M.C., Delgado C., Sa M., & Sousa C. (2014). Comparing CSR communication on corporate web sites in Sweden and Spain. Baltic Journal of Management, 9, (2), 231-250.
• Banker, R.D., Charnes, R.F., & Cooper, W.W. (1984). Some models for estimating technical and scale inefficiencies in data envelopment analysis. Management Science, 30, 1078–1092.
• Charnes, A., Cooper, W. W. & Rhodes E. (1978). Measuring the efficiency of decision-making units. European Journal of Operational Research, 2, 429–444.
• Clarke Geraldine (1997). Messages from CEOs: A content analysis approach. Corporate Communications 2(1), 31-39.
• Cooper, W. W., Seiford, L. M., Tone, K.., (2006). Introductionto Data Envelopment Analysis and Its Uses, Springer.
• Cormier, D., Ledoux, M., & Magnan, M., (2009). The use of web sites as a disclosure platform for corporate performance. International Journal of Accounting Information Systems, 10(1), 1-24.
• Courtemanche, L., Côté, L., & Schiehll, E., (2013). Board capital and strategic turnaround: A longitudinal case study. International Journal of Disclosure and Governance, 10(4), 378–405.
• Diction 7 Help Manual (2015). http://www.dictionsoftware.com/download.php?file=wp-content/uploads/2015/07/DICTION-7.1Manual.pdf
• Ege, İ., Topaloğlu E. E., & Özyamanoğlu, M., (2013). Finansal performans ile kurumsal yönetim notları arasındaki ilişki: BIST üzerine bir uygulama. Akademik Araştırmalar ve Çalışmalar Dergisi, 5(9), 100-117.
• Fan, Z., Wang, L., & Zhang, J.,(2003). Corporate competitive strategy and voluntary disclosure. Social Science Electronic Publishing, Inc.: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1106614
• Feroz, E.H., Kim, S., & Raab, R.L., (2003). Financial statement analysis: A data envelopment analysis approach. Journal of the Operational Research Society, 54, 48–58.
• Fiol, C. M. (1995). Corporate communications: Comparing executives' private and public statements . Academy of Management Journal, 38(2), 522-536.
• Gandia, J. L., (2008), Determinants of internet-based corporate governance disclosure by Spanish listed companies. Online Information Review. 32(6), 791-817.
• Hamrouni, A., Miloudi, A., & Benkraiem, R. (2015). Signaling firm performance through corporate voluntary disclosure. Journal of Applied Business Research, 31(2), 609-620.
• Hamrouni, A. & Ratsimbanierana, H. (2012). The extent of voluntary information in the annual report and the share price volatility: Application of DEA and SFA on the French market. The Journal of Modern Accounting and Auditing, 8(7), 951-966
• Hrasky, S., & Smith, B. (2008). Concise corporate reporting: Communication or symbolism? Corporate Communications, 13(4), 418-432.
• Huafang, X., & Jianguo, Y., (2007). Ownership structure, board composition and corporate voluntary disclosure. Evidence from listed companies in China. Managerial Auditing Journal, 22(6), 604-619.
• Hutt, R. W. (2010). Identifying and mapping stakeholders: An industry case study. Corporate Communications, 15(2), 181-191.
• Jeanjean, T., Stolowy, H., Erkens, M., & Yohn, T. L. (2015). International evidence on the impact of adopting english as an external reporting language. Journal of International Business Studies, 46(2), 180-205.
• Kahveci, E., (2011) Firm performance and resource-based theory: an application with DEA. International Journal of Contemporary Business Studies, 2(4), 38-50.
• Kahveci, E. and Taliyev, R.(2016) The Disclosure Behavior and Performance of Russian Firms: Public Disclosure Index and DEA Application. In progress.
• Lin, Y., Chang, H., Chen, J., & Wu, G. (2014). Accounting disclosure quality, capital market intensity and national productivity. Annals of Operations Research, 221(1), 239-254.
• Manzoni, A. (2007). A New Approach to Performance Measurement Using Data Envelopment Analysis: Implications for Organisation Behaviour, Corporate Governance and Supply Chain Management. Victoria University Doctoral Thesis, Victoria Graduate School of Business, Faculty of Business and Law.
• Nath, P., Nachiappan, S., & Ramanathan, R. (2010). The impact of marketing capability, operations capability and diversification strategy on performance: A resource-based view. Industrial Marketing Management, 39(2), 317-329.
• Nekhili, M., Boubaker, S., & Lakhal, F. (2012). Ownership structure, voluntary R&D disclosure and market value of firms: The french case. International Journal of Business, 17(2), 126-140.
• Rouse, P., Chen, L. & Harrison, J.A. (2010). Data envelopment analysis: a practical tool to measure performance. Australian Accounting Review, 20(2), 165–177.
• Sengupta, P., (1998). Corporate disclosure quality and the cost of debt. The Accounting Review, 73(4), 459-474.
• Silva, W. M., & Alves, L.A., (2004), The Voluntary Disclosure of Financial Information on the Internet and theFirm Value Effect in Companies Across Latin America, Social Science Electronic Publishing, Inc.: http://www.ssrn.com.
• Samad, Q., A., & Patwary, F., K., (2003). Technical efficiency in the textile industry of Bangladesh: An application of frontier production function. Information and Management Sciences, 14(1), 19-30.
• Scott, Patricia B. (2012). How is the study of communication changing? Corporate Communications: An International Journal, 17(3), 350-357.
• Sueyoshi, T., Mika Goto, & Yusuke Omi, (2010). Corporate governance and firm performance: Evidence from Japanese manufacturing industries after the lost decade. European Journal of Operational Research, 203, 724–736.
• Spence, M., (1973), Job Market Signaling. The Quarterly Journal of Economics, 87(3), 355-374.
• Ulucan, A., (2000). Şirket performanslarının ölçülmesinde veri zarflama analizi yaklaşımı: genel ve sektörel bazda değerlendirmeler. Hacettepe Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi, 18(1), 419-437.
• Ulucan, A., (2002). ISO500 şirketlerinin etkinliklerinin ölçülmesinde veri zarflama analizi yaklaşımı:farklı girdi çıktı bileşenleri ve ölçeğe göre getiri yaklaşımları ile değerlendirmeler. Ankara Üniversitesi SBF Dergisi, 57(2), 182-202.
• Verrecchia, R E. (1983). Discretionary disclosure. Journal Of Accounting & Economics, 5(3), 179-194.
• Vergauwen, P., Bollen, L., & Oirbans, E. (2007). Intellectual capital disclosure and intangible value drivers: An empirical study. Management Decision, 45(7), 1163.
• Wisniewski, T. P.,& Yekini, L. S. (2014). Predicting stock market returns based on the content of annual report narrative: A new anomaly. St. Louis: Federal Reserve Bank of St Louis. https://ideas.repec.org/p/pra/mprapa/58107.html
• Zhu, J,. (2000). Multi-factor performance measure model with an application to Fortune 500 companies. European Journal of Operational Research, 123, 105 – 124.