dc.description.abstract | What is the economic value of strategy? Although the extant literature in strategic
management has explored many different theories of the firm, the research field
has centered on an underlying consensus that strategy is an important driver of
corporate performance, and thus holds significant economic value. By extension,
if we assume efficient markets, the disclosure of such important information
should be reflected in the firm market value. Building on these assumptions, our
paper will attempt to identify the economic effects of strategy by examining the
impact of strategy disclosure in annual reports on the firm market value.
By performing an event study structured around the release date of corporate
annual reports for Norwegian listed firms, this study aims to isolate the financial
effects from changes in strategy disclosure quality, represented as the presence of
abnormal returns in the event period. To test this relationship, we used a selfconstructed
score to represent the quality of strategy disclosure by measuring the
informational value across several important strategic dimensions presented in the
corporate annual reports. Subsequently, we used the disclosure quality of prior
years to establish the investor expectations for strategy disclosure, allowing us to
investigate the impact of information “shocks” on security price returns.
Our findings show that the disclosure of strategically important information
indeed holds economic value, finding significant abnormal returns, and thus
increased firm market value, for positive changes in strategy disclosure quality.
Further testing of single dimension effects, however, were less conclusive. This
can indicate that, while investors value revelations on corporate strategy overall,
disclosure on single dimensions are less valuable due to their potential lack of
context. Despite this, our results clearly show that there are substantial economic
gains from increasing reporting quality on corporate strategy, encouraging further
study of this important, yet partially neglected, area of research. | nb_NO |