The relationship between annual and S.E.S. reports. An empirical analysis on the petroleum companies

This paper is based on the consideration that information asymmetry reduction is not only related to the increase of spread information (Verecchia, 2001; Healy et al., 2001; Peterson et al., 2006) but also to the improvement of clearness of information: the development of an effective communicative behaviour is linked to a good disclosure completeness and to an adequate organisation content of the information between the periodical reports. Empirical research emphasizes the importance of information increase, e.g. information on products, processes, strategies, risks, social-environmental impacts, intangibles assets (Botosan, 1997; Beattie et al., 2002; Beretta et al., 2004). As to this, in the last years focused reports on specific subjects have increasingly been made public: in this sustainability, environmental and social reports (SES) have played a very important part (Mazzoleni, 2004; Brammer et al., 2006). At the same time, content of the annual report has been extended by the introduction of disclosure about social, environmental and sustainability issues (Moneva et al., 2000; Di Piazza et al., 2002). In such a context, scarce attention was paid to the different reports’ integration. More disclosure could be positive for the reduction of information asymmetry but lack of integration between reports and information redundancy couldn’t be useful for the readers’ knowledge. SES reports can follow specific guidelines for their drafting; on the contrary the “soft” disclosure in the annual report isn’t regulated by a set of international principles. However, developments in annual report disclosure regulation have been including a part of information naturally located in SES reports. The lacking of coordination between SES guidelines and annul report drafting rules doesn’t lead to a problem solving. By means of a disclosure-scoring analysis (Robb et al., 2001; Vanstraelen et al., 2003; Beattie et al., 2004; Teodori et al., 2006), the aim of this paper is the analysis of the relationship between the content of the annual reports and of the SES reports. To quantify the degree of reports’ completeness and integration a composite unweigheted index of disclosure has been established. Reports of year 2005 have been analysed. This paper particularly focuses on SES reports because of their large diffusion. Besides, SES reports include a wide range of information related to the whole company’s activities, investigating it according to social, environmental and financial points of view. To better understand the companies’ communicative behaviour and to improve the accuracy of the results a specific industry is selected. Extractive petroleum companies are analysed because of their relevant environmental and social impact. In addition to this, previous researches demonstrate that petroleum companies have transparent communication behaviour (FASB, 2001; PriceWaterhouseCoopers, 2002; Quagli et al., 2005). Finally, there are specific guidelines for their SES reports’ drafting (IPIECA/API, 2005). Companies listed in NYSE, included in S&P 1200 and DJSTOXX 600 Indexes are selected to enable a worldwide disclosure behaviour analysis. The analysis will allow the identification of some communication models and will provide possible response in order to combine the need for more information with the communication tools’ integration.