The integrated report and the financial analysts' perception

Financial analysts have long been playing a fundamental role as “infomediares” in the identification and subsequent valuation of intangible assets in order to give a "correct" value to the companies to limit or at least mitigate the well-known gap between book value and the market value of listed companies, in particular "intangible-intensive" companies (Novellini, Gasperini, Carosio, 2004; Gasperini, 2013). In this moment of financial crisis, this difference - negative for many companies - has shed light on the correct identification of the so-called intangible liabilities i.e. uncertain events or risks that could adversely affect the achievement of certain business goals, or the "bad "use of intangible resources of the company. The financial analyst has therefore to perform a daunting task characterised by many difficulties, mostly related to the information gap in the traditional corporate disclosure in the financial markets. A critical step into the development of the new models of business reporting has been represented by the recent introduction of the Integrated Report (International Integrated Reporting Council IIRC, 2010; 2011; 2012; 2013) or One report, as called by some authors (Eccles, & Krzus, 2010; Eccles, & Armbrester, 2011). It is a new report which includes in addition to financial information, non-financial information, about the companies’ ability to create a sustainability value and about the companies’ risks. Although by now a standardized framework and detailed guidelines for disclosure are being defined (International <IR> Framework Consultation Draft 16 April 2013), the integrated report is already been adopted by an increased number of companies, and in particular in South Africa the listed companies are required to draw the integrated report following the guidelines issued by King Code of Governance Principles for South Africa 2009 (King III) and after the adoption of these guidelines by the Johannesburg Stock Exchange (JSE) as a requirement for access to the stock markets (http://www.jse.co.za/Home.aspx). The purpose of this paper is therefore to assess whether the adoption of the integrated report by listed companies could facilitate the activity of selection and post-processing of financial and non-financial information by financial analyst. Furthermore, it will be interesting to appreciate the potential impacts of this new kind of economic and financial communication: some researches (Barth et al., 2001) indeed confirm the existence of a positive correlation between the increase and / or improvement of the quality of information disclosed by the companies and the increased coverage by financial analysts. The gradual adoption of the integrated report by listed companies may have positive effects on the activities of financial analysts in regard to an easy acquisition of standardized and comparable information, in particular if these information may be codified by an advanced computer language such as XBRL (eXtensible Business Reporting Language). Equity markets may also be able to give a more correct and realistic price to the companies that adopt the integrated report rather than to the ones preparing a traditional annual report. The methodological approach is based on the evaluation of perception through the preparation of a questionnaire to be submitted to Italian financial analysts. The selection of the sample includes the identification of a list of analysts belonging to the Italian Association of Financial Analysts (AIAF, 2012), divided into subcategories according to different features such as the level of professional experience, personal background, etc.. The questionnaire is prepared using the computer and sent by e-mail to analysts. With regard to the content of the questionnaire and the preparation of the single questions, the objective is to evaluate the analysts' comments concerning the content and relevance of different categories of information in the integrated report, the ease of access to such information and its presentation , etc..