The Contribution of Management Commentary Index (Ma.Co.I) in Annual Banking Reports (ABR) and the Chronicle of the Great Greek Crisis

Abstract

The research explores the extent to which the implementation of International Financial Reporting Standards (IFRS) in the Greek banking sector has affected its financial and narrative reporting between the periods prior (2002-2004) and after (2005-2010) the implementation of the IFRS. In particular, we examine the relation between Price per Share (P), Earnings per Share (EPS) and the Book Value (BV) per share using data from listed banks of Athens Stock Exchange (ASE). Further, the change of the narrative reporting quality of the Greek banking sector is studied along with the key financial indicators trends between the two above periods. Moreover, we investigate the disclosure quality of narrative information of annual reports for the period after the Greek financial crisis ( i.e. from 2008 to 2010). Finally, we assess the relation between the key financial indicators and Management Commentary (MC). The findings indicate a positive relationship between P, BV and EPS after the first period of IFRS adoption ( i.e. from 2005 to 2007). In addition, we report that MC has been considerably improved in the same period, while a positive impact in the key financial Indicators has been observed. Furthermore, empirical evidence specifies that Debt tends to be the most important indicator of Management Commentary. Finally, in the beginning of Greek crisis period the disclosure quality of narrative portion of annual reports are lower except. An important innovative characteristic of the above results is that the Management Commentary Index (Ma.Co.I) is able to measure the actual quality of Annual Banking Reports (ABR) and provide a reliable and unique tool for the investors.