The Determinants of Voluntary Strategy Disclosure: An International Comparison

Per Tronnes
University of New South Wales
Australia

Richard Morris
University of New South Wales
Australia

Abstract:
Strategy is about an organization’s long-term direction and scope. Strategy ultimately impacts firm performance and provides a useful context for evaluating financial statements. Using a hand-collected data set, we examine determinants of voluntary strategy disclosures in the annual reports of 204 large companies from 12 Asian and European countries in 2005. Strategy is measured using an index covering five strategy areas, based on the literature and prior research. We argue, and find, that strategy disclosures vary across countries because of differences in legal system, culture and provision of finance. On the firm level, size, Big 4 auditor, cross-listing on New York Stock Exchange and profitability are always significant in explaining the variance in strategy disclosure, irrespective of country-level controls used. Country-level and firm level variables matter. Financial statement users need to take both into account in assessing a firm’s reported strategy and performance.