Skip to content

Is forward-looking financial disclosure really informative? Evidence from UK narrative statements

Research output: Contribution to journalArticle

Forward-looking financial disclosure (FLFD) is potentially uninformative if it does not change from the previous year, especially after a significant change in firm performance. This study aims to examine whether and to what extent FLFD is changed in response to changes in firm performance. Then, it investigates the effect of such change in FLFD on firm value. The study uses a sample of UK narrative statements over the period from 2005 to 2011. It finds an association between change in FLFD and change in firm earnings performance. However, it finds weak evidence that firms with larger changes in earnings performance are likely to change their FLFD more than those with smaller performance changes. In addition, when we distinguish between well-performing and poorly performing firms, it finds that the change in FLFD is more positively associated with poorly performing firms compared to well-performing firms. Finally, the change in FLFD has no effect on the value of well-performing firms, while, it negatively affects poorly performing firms. The results suggest that forward-looking financial information in UK narratives contains some relevant information about firm performance. However, it neither affects the value of well-performing firms nor enhances investors’ valuation of poorly performing firms.
Original languageEnglish
Pages (from-to)52-61
Number of pages10
JournalInternational Review of Financial Analysis
Early online date5 Jun 2015
Publication statusPublished - 1 Oct 2015


  • HUSSAINEY_cright_18A_Is forward-looking financial disclosure really informative

    Rights statement: NOTICE: this is the author’s version of a work that was accepted for publication in International Review of Financial Analysis. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in International Review of Financial Analysis, vol 41, (2015), DOI: 10.1016/j.irfa.2015.05.025

    Accepted author manuscript (Post-print), 674 KB, PDF document

Related information

Relations Get citation (various referencing formats)

ID: 4815673