Content and quality of information: analysis of the management discussion session in the Italian financial reports in the period 2003-2008

Three events in particular have affected the management of listed companies: (i) the increasing importance of the intangible assets as basic elements of the competitive advantage in business; (ii) introduction of the IFRS; (iii) the world financial crisis. In this worldwide context, regulators view narrative disclosures as the key to achieving the desired step-change in the quality of corporate reporting. To satisfy the new stakeholder information needs, business reporting has to expand beyond the traditional financial reporting model towards more forward-looking information of a non-financial nature. The paper wants to study the quality and quantity of financial communication in the management discussion in terms of: information categories, time orientation (historical information, forward-looking information, intertemporal information), nature (financial, non-financial) and mode of expression (narrative, quantitative, mixed). The analysis is performed considering the 2003, 2005 and 2008 financial statements in Italy. Content analysis is the method applied. One of the main results that emerges is that the quantity of information increases and that this information is always mainly related to the business and it is non-financial, narrative and historical. Very little space is dedicated to forward-looking information.