Annual reports that strengthen corporate reputation: meeting the needs and expectations of the investors

Public companies are legally obliged to disclose annual financial results to their shareholders, investors or any other interested audiences. The documents that provide such disclosure are commonly known as annual reports, and in addition to the mandatory financial reporting, modern-day annual reports often contain voluntary disclosure – information about business strategy, operational environment, sustainability reporting, corporate governance, risk management, and other information that is considered important and relevant by those preparing a report. At the time when the study was conducted, there was no legislation in Finland that would oblige public companies to disclose any other information than financial statement in accordance with International Financial Reporting Standard (IFRS). The financial statements shall be produced in strict compliance with the abovementioned reporting standard; however, the content of voluntary disclosure that companies include into annual reports is not regulated, and as a result, varies significantly from company to company. Many researchers consider annual reports to be important communication tools that have significant effect on corporate reputation. The aim of this research was to identify specific criteria towards the format and content of voluntary disclosure of a good annual report from the perspective of its primary audience – investors and shareholders; analyse how those needs and expectations are currently met in the annual reports produced by Finnish public companies, and come up with a proposition on how the annual reports of publicly listed Finnish companies may or shall be enhanced in order to fulfil the expectations of investors and shareholders better and consequently, contribute positively to corporate reputation. The research was designed as exploratory sequential study: at the first stage of the research qualitative data was collected to identify the needs and expectations of investors towards annual reports and an instrument (research matrix) to proceed with at the second stage of the research was developed basing on the findings of the data analysis; at the second stage, the quantitative data was collected from the annual reports 2015 of the sample companies and analysed using the research matrix. The research matrix itself is a valuable outcome of the research as it can be used by those preparing annual reports to produce reports that fulfil the needs and expectations of investors better, as well as by researchers for further studies in the field of corporate reporting. An analysis of the annual reports 2015 of the sample companies revealed, that in general corporate reporting practices in Finland are very good and the studied reports comply with many of the identified criteria. However, there are areas in corporate reporting practices that could significantly benefit from further improvement. The recommendations on how to implement the improvements and produce annual reports that fulfil the expectations of investors better (and thus positively impact corporate reputation) are provided in this report