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Università degli Studi Dipartimento di
di Brescia Economia Aziendale
Francesco AVALLONE – Monica VENEZIANI
MODELS OF FINANCIAL DISCLOSURE
ON THE INTERNET:
A SURVEY OF ITALIAN COMPANIES
Paper numero 24
Dicembre 2002
MODELS OF FINANCIAL DISCLOSURE ON THE INTERNET:
A SURVEY OF ITALIAN COMPANIES*
di
Francesco AVALLONE
Dottorando in Economia e Management dei servizi
nell'Università degli Studi di Genova
e
Monica VENEZIANI
Dottoranda in Economia Aziendale
nell'Università degli Studi di Brescia
*
The extensive version of this paper was presented at the 25th annual European Accounting Association
congress in Copenhagen on April 2002.
CONTENTS
Keywords
Abstract
pag.
Introduction ............................................................................................................. 7
PART A - THE STATE OF THE ART
1. Aim and structure of the first phase of the research........................................ 8
1.1 The sample investigated ...................................................................................... 8
1.2 The variables investigated ................................................................................... 9
2. General site characteristics................................................................................. 10
3. Structural features of the IR section.................................................................. 11
4. Mandatory information ...................................................................................... 12
5. Voluntary disclosure ........................................................................................... 13
5.1 Financial disclosure ............................................................................................ 14
5.2 Information of an institutional nature ................................................................. 15
5.3 Business model information ................................................................................ 16
5.4 Other information................................................................................................ 17
6. Form and contents of the financial disclosure .................................................. 18
6.1 The interactive business model............................................................................ 19
PART B - RESEARCH METHOD
7. Sample description .............................................................................................. 20
8. Disclosure levels and descriptive results............................................................ 20
9. Statistical analysis................................................................................................ 26
9.1 The hypotheses..................................................................................................... 26
9.2 Descriptive results ............................................................................................... 28
Conclusion and recommendations for further research ...................................... 30
References ................................................................................................................ 33
Keywords: Internet reporting, Voluntary disclosure, Corporate disclosure, Investor
Relations, Italian listed companies, Disclosure levels.
Abstract
The growth in the diffusion of financial information on corporate web sites has given
rise to a number of studies and research into the topic (e.g. IASC 1999, FASB 2001).
Some authors have carried out surveys to establish the extent of Internet reporting by
companies in different countries (Flynn and Gowthorpe, 1997; Lymer, 1997; Marston
and Craven, 1999 etc.). Past studies have tended to focus on mandatory disclosure via
the Internet. This study aims to go beyond this and shift the focus to voluntary financial
disclosure as well as the possibilities offered by the Internet to disclose this kind of
information.
The first step was the definition of “the state of the art” in corporate financial disclosure
on the web. An empirical study was carried out from mid-July to mid-September 2001
among the 277 Italian companies listed on the Milan Stock Exchange. It examined
whether voluntary financial information was available on web sites and, if so, its extent.
This study looked for a statistical relationship between some segments of the overall
Italian Stock Exchange (MIB 30, STAR, “Nuovo Mercato”) and the extent and the way
of communicating voluntary information on the Internet in order to find the “cutting
edge” sector in financial corporate disclosure. A linear correlation between market
capitalization, high debt equity ratio, outstanding share and the extent of financial
disclosure on the Internet was investigated by means of the “rho” coefficient.
Models of financial disclosure on the Internet: a survey of italian companies
Introduction1
At the present time, because of the arrival of the new economy and the growth of the
Internet, more and more companies are including areas dedicated to financial
communication aimed at the financial markets on their web sites. The user can acquire,
at any time, a lot of financial information on the web. It is for this reason that it is
becoming one of the main channels of financial communication (Quagli, 2001).
This situation would appear to be positive initially, but on further consideration, it does
give rise to doubts concerning the value of information available on the web. To begin
with, this depends on: contents, timeliness and reliability.
It consequently depends on the means of multimedia communication adopted and on the
interaction with the user. Considering the extent of the area, which is still in its
evolutionary phase, as a first stage of research, it was decided to examine how Italian
companies use the Internet to communicate information intended specifically for the
financial markets. More precisely, to analyse whether these companies wanted to
communicate in a new way, and for what reason, to take on an active, dynamic role in
informing or, simply to present information passively (as far as legal obligations are
concerned) showing minimal interest in the user. This research only considers direct
information and makes a clear distinction between mandatory and voluntary
information.
The purposes of this first part are to define the choices of companies regarding the uses
of the web for financial communication and to formulate the first proposals for
improvement. The results of the various types of information, obtained through many
surveys, include: contents, degree of depth, ease of access, user availability, level of up-
dating, reliability and means of communication using the Internet potential and others.
It became clear that although this area has been investigated in other countries, in Italy
very few studies have been carried out (Teodori, 2000; Quagli, 2001).
In the second part, the listed companies have been ranked according to form and
content, and a summary picture of the Italian situation has been defined.
The part B mainly concerns analysis of the stock market segments to which the
companies belong and statistical research to study the correlation between financial
communication on the Internet, particularly voluntary disclosure, and these three
variables:
a) high debt levels;
b) the percentage of stocks on the market (outstanding shares);
c) the percentage of market capitalization.
It should be noted that the three variables considered in the analysis are only examples
of the many possibilities. The results given have a preliminary value, as they form the
beginning of the research and require more detailed processing in the future.
1
This paper is produced as a part of a PriceWaterhouseCoopers (Corporate Finance s.r.l., Milan) project on
“Financial communication strategies via the Internet”.
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Francesco Avallone - Monica Veneziani
PART A
THE STATE OF THE ART
1. Aim and structure of the first phase of the research2
1.1 The sample investigated
The empirical analysis is based on the 277 Italian listed companies on the Milan Stock
Exchange (June, 30th 2001). The most important segments (MIB 30, “Nuovo Mercato”,
STAR and Ordinary) have been considered. The information from the web sites was
gathered from 15/7/2001 to 15/9/2001. The emerging situation is shown in table 1.
Table 1 – Level of web-site availability
Companies with site available 251 91%
Companies with site in preparation 3 1%
Companies without a site 23 8%
Total 277 100%
This reveals that 91% of the companies listed have a site. This is positive, considering
the situation a year before, when, out of a sample of 245 companies, only 82% had a
web-site ‘Teodori (2000)’. This is the demonstration of the growing importance of
company web-sites. As far as many companies are concerned a web-site has become an
indispensable means of information.
It is also revealing to divide the table up into the various stock market segments3 (table
2).
Table 2 – Availability of sites according to the various stock market segments
With site Without site Total
MIB 30 30 – 100% 0 30 – 100%
“Nuovo Mercato” 42 – 100% 0 42 – 100%
STAR 28 – 97% 1 – 3% 29 – 100%
Ordinary segment 127 – 84% 24 – 16% 151 – 100%
It can be seen that web-sites are used more by companies in the upper and middle
capitalization sections, especially those orientated towards the new economy, with an
innovative approach to products, processes and service. For such companies, the use of
the Internet appears to be very revealing.
2
This research project is part of a wider inter-university one, being carried out by the Universities of Genoa and
Brescia. Prof. A.Quagli and Prof. C.Teodori, Dr. G.Profumo and the authors of this research are participating. As will
be revealed later, this is one of the first Italian studies on the subject and the results will be published in a combined
format, that is, for all of the listed firms.
3
The most important markets on the Italian Stock Exchange are two, “Nuovo Mercato”, reserved for companies
operating in high growth sectors or implementing innovative product or service development plans, and “Borsa
(MTA)”. The latter market, the Electronic Equity Market for companies operating in consolidated sectors of the
economy, can be subdivided in two different segments. The first, called “S.T.A.R.”, i.e. High Standard Mid-Cap
Market (for mid and small caps with a market capitalization under 800 million euro) undertake to satisfy higher
requirements in terms of transparency, corporate governance and liquidity. The other one is the “Ordinary Market
Segment” (for other companies with a market cap under 800 million euro). Within the latter, the MIB 30 companies
(the thirty companies with the highest market capitalization) have been considered separately from the others.
8
Models of financial disclosure on the Internet: a survey of italian companies
Compared to the preceding year, there is a distinct improvement in the Ordinary
segment, which is the least homogeneous in terms of composition.
1.2 The variables investigated
The analysis of financial communication on web-sites, in terms of contents, reliability,
interaction and use of Internet potential, used 251 companies with web-sites. The course
of the research went on to examine the following points in more detail.
General site characteristics: languages available, comparison between Italian
and English versions as regards the structure of the Investor Relation (IR)
section and the mandatory documentation; navigation tools (maps, search
engines, menus); multimedia options (audio and visual files); interaction with
the user (e-mail, FAQ, forum); reliability of the information (dates of most
recent updates and disclaimer) - section 2.
The structure of the financial section: degree of diffusion; information access;
section titles; clarity of reading order; security level and data use modes (section
3).
Mandatory information, derived from legal restraints, mostly identifiable in the
annual and interim reports: availability, contents, timeliness, reliability and
completeness (section 4).
Voluntary information: distinguishing between that of financial origin (press
releases, press coverage, presentations to analysts, share quotations, financial
calendar, market consensus …) and institutional (group structure, property
assets, corporate governance), connected to business (mission, business area,
operating volume, customer and supplier data, research activity, quality control,
product description .…). Availability, degree of up-date and depth will be
examined (section 5).
The first part will be concluded with an analysis of a conceptual model (section 6). The
aim being to identify the gap between the situation in Italy and the potential use of the
Internet as regards form and content. Section 6.1 is about the concept of an interactive
business model.
9
Francesco Avallone - Monica Veneziani
2. General site characteristics
The objective of this section is to define the complete situation which the user interested
in financial information finds when entering a site (table 3).
Table 3 – General site characteristics
Some variables investigated Numerator (yes) Base %
Changing language option Italian/English 143 251 57%
Sites only in English 25 251 10%
Sites only in Italian 83 251 33%
Comparison IR section 115 143 80%
Company e-mail 167 251 66%
IR e-mail 120 251 48%
Date up-dating 24 251 10%
Disclaimers about the use of data 24 251 10%
Disclaimers about completeness of data 19 251 8%
Disclaimers about the responsibility for external sites 12 251 5%
The languages used can indicate the degree of internationalization and the level of the
company’s disclosure to the main world markets. Analysis was carried out on two
levels:
a) on the home page, noting the language used in the introduction and the presence
of a language change option;
b) comparison of the structure in English and Italian in the IR section.
Regarding point a), English was found to be fairly widespread; only 33% of sites were
in Italian, of which a third had documentation and financial information in English as
well (table 3 – first part). In addition, 69% of companies used Italian as the language of
introduction, 14% English and 17% gave the user the choice on the start page.
Concerning point b), despite the widespread use of English, only in 80% of cases (143,
where a comparison can be made) is there a precise correlation between the IR section
in Italian and in English. In the rest, the information is given in a summarized form or
there is only a limited amount of material in the foreign language. It is relevant to
emphasize that in not one case was a declaration about the application of accounting
standards used to draw up the statement in English. The ideal situation would be one in
which there is total correlation between the contents of the site in Italian and any other
foreign language.
The site map and an internal search engine are the tools which make the navigation of
the site quick and efficient. It resulted that these tools are not as widely available as
might be wished (map 36%; search engine 22%).
The same unsatisfactory situation was found as regards multimediality (particularly
effective are video (7%) with commentary in presentations of a company or a group of
companies, of financial results, of products and of other significant events) and
interactivity that can appear in many forms (e-mail (66%), FAQs (6%), forum (1%),
interactive business model (0%), possibility of personalizing the web site 1%).
The financial value of information on the web is dependent on its level of timeliness and
reliability. The degree of information security can be expressed using the following
parameters:
a) information up-dating;
b) degree of precision and completeness;
10
Models of financial disclosure on the Internet: a survey of italian companies
c) information sources, specifying if direct or indirect.
The lack of regulations on disclosure of financial information on the Internet, means
that a high level of data reliability is required 4. For this reason, the date of site up-
dating and declarations of reliability are very relevant.
The date of the latest determines the value of the information. Without it, the user is
unable to evaluate its relevance, and this, in turn, affects its application and use, and in
some cases, the degree of trustworthiness. Companies do not appear to be very sensitive
to this problem (10%).
The same unsatisfactory situation has been found as regards disclaimers (table 3 – last
part). There is also a tendency among enterprises to assume a defensive position: this
was brought to light by declarations limiting the responsibility of the company for
errors, omissions and changes made to the site. Such a state of affairs certainly does
nothing to increase user confidence in the Internet.
3. Structural features of the IR section
As the subject under investigation is financial disclosure, the structural features of the
IR section were examined (table 4). This is the area which is most frequently accessed
by financial investors and contains a wealth of economic and financial data. Both
mandatory and voluntary disclosure will be examined.
Table 4 – Structural features of the IR section
Some variables investigated Numerator (yes) Base %
IR section 190 251 76%
Ease of access 137 190 72%
Date up-dating IR section 33 190 18%
Specific disclaimers IR section 12 190 6%
Declarations on the use of standards 0 190 0%
To evaluate the degree of diffusion of the financial section on web-sites, a check was
made for the presence of a specific link to an area dedicated to financial disclosure,
independently from the contents.
After checking the diffusion of IR sections (76%), the speed and ease of access to the
area was considered5 (72%).
A generally positive evaluation can be given based on the elements examined.
Before analysing the content of financial disclosure, a look will be taken at the last
aspect connected with the level of data security in the financial section. To appreciate
the current situation, three points were considered:
a) date of the latest up-date on the home page and on the most important pages of
the section;
4
In Italy the Commissione Nazionale Società e Borsa (CONSOB - Italian Stock Exchange Commission) intervened
with Communication n. DME/1000796 of 04/01/2001 whose subject was “The use of Internet sites for the disclosure
of information by companies giving out listed financial tools.”
5
In order to move around the site easily, there must be an easy-to-follow reading route. An evaluation of the ease
with which the site can be navigated is subjective, to a great extent. Therefore a number of parameters were selected
to increase the objectivity of the judgement. The three variables used were: a) an audio or visual signal on entering
the IR section; b) signs along the route with high-lighting of the various areas of information; c) a signal on entering
an external site.
11
Francesco Avallone - Monica Veneziani
b) specific disclaimers;
c) declarations on the use of Associazione Italiana Analisti Finanziari (AIAF -
Association of Italian Financial Analysts) and CONSOB recommendations or
other standards.
A somewhat unsatisfactory picture emerged (table 4 – second part).
4. Mandatory information
This section deals with the disclosure on the web of mandatory and connected
information, such as reclassified balance sheets and income statements, financial ratios,
segment data and high-lights (table 5). The aim is to include: type, availability, degree
of completeness and amount of detail given on company web-sites.
Table 5 – Mandatory information and connected news
Some variables investigated Numerator (yes) Base %
Financial statement 191 251 76%
Consolidated financial statement 176 251 70%
Six-monthly report 156 251 62%
Quarterly report 189 251 75%
Completeness (on average) - - 94%
Download 198 207 96%
Download whole document 6 133 198 67%
Pdf format 180 198 91%
Html format7 4 198 2%
Disclaimers about completeness of financial statements 19 207 9%
Archives 129 251 51%
Reclassified statements and financial ratios 52 251 20%
Highlights 109 251 43%
A well-organised site facilitates access to information, especially when there is a great
quantity of varied material. As mandatory information is different from other types, it
should be a section of its own (86%) (207). A two-fold revelation was made regarding
this documentation. The first being about its diffusion and the second concerning its
completeness8. This research based its findings on the most recent annual and interim
reports9.
Compared to last year ‘Teodori (2000)’, a satisfactory situation regarding diffusion
(table 5 – first part) and completeness (94% on average) was found to exist, even taking
into consideration the inclusion of auditors’ reports (77% on average).
After investigating the diffusion levels of mandatory information, the next step is find
out its complete availability. At first sight, the situation concerning the availability of
mandatory information on the web is positive (96%), but there is still plenty of room for
6
Download single items (18%); download with option whole document or for single items (15%).
7
Others formats (Word, Excel) 7%.
8
Financial statements were only considered complete if they displayed balance sheet and income statement,
explanatory notes and management reports. Interim reports follow the minimum requirements laid down.
9
Financial statements closed before the end of 2000, six-monthly before 30/06/2000 and the first quarterly of 2001
were considered.
12
Models of financial disclosure on the Internet: a survey of italian companies
improvement in down-loading operations. In most cases, for example, the user has
frequently to download the whole document (67%), or he cannot use the full potential of
the Internet in terms of hyperlinks. Internal statement links were lacking in nearly all
cases (HTML format 2%) and external links added nothing to the content. It would be
much easier to consult and interpret a financial statement using links between the data
on the balance sheet, or between mandatory documents and other details on the site,
such as financial situation, product features and business areas.
It would appear that companies lack the will or the ability to communicate in an
innovative way.
Disclosure of mandatory information is a very important service that a business can
offer its users as it saves on time and costs. The value of the information disclosed on
the web depends on the degree of reliability and security offered. Companies need to
improve the trustworthiness of disclosures by accepting more responsibility (9%
declaration of completeness and no disclaimers about observation of accounting
principles). It is difficult to understand why disclaimers, both generic and specific, are
rarely displayed on sites. In the writers’ opinion, the absence of declarations of
responsibility is due to the company’s lack of attention to such details. This is yet
another demonstration of how financial disclosure on the Internet is in its infancy in
Italy.
The analysis will continue by examining the aspects of archives and economic
information connected to financial statement.
Information from the past is of no less importance and, indeed, vital for temporal
financial analysis and for defining a summary of economic performance. It was found
that 51% (251) of the sample included archives, the tendency is to disclose only the
previous year’s financial report.
As well as mandatory information, it is desirable to find other details such as:
reclassified statements, financial ratios and highlights which are helpful in
understanding the economic conditions of a company. In the best of cases, the data is
available for time and space analysis for a period of 4-5 years. When these details are
included, the means of calculation and the criteria used to determine the main
aggregates and relative ratios must be given. Highlights are very much appreciated. A
negative situation was found as regards the degree of disclosure connected to financial
statements (table 5 – last part). Nowhere was this data accompanied by comments on
time and space analysis and only rarely were the index calculation criteria given. Thus,
the information disclosed was often found to be incomplete and therefore difficult to
interpret.
5. Voluntary disclosure
The subject of this section, which is also the central point of the research is very wide. It
includes all those details not included in legal mandatory requirements. Four main
groups were examined:
1) financial disclosure;
2) data of an institutional nature;
3) information connected to the business model;
4) other information.
13
Francesco Avallone - Monica Veneziani
5.1 Financial disclosure
The following main areas were investigated (table 6):
a) presentations to analysts and the financial calendar;
b) press coverage and financial press releases;
c) stock market quotations.
Table 6 – Financial disclosure
Some variables investigated Numerator (yes) Base %
Presentation to analysts 103 251 41%
Download presentations 95 103 92%
Presentation up-dating 88 103 85%
Financial press releases 166 251 66%
Financial press coverage 41 251 16%
Distinction between categories of information 18 214 8%
Stock market quotations 116 251 46%
Internal section for stock market quotations 61 116 53%
External site for stock market quotations 51 116 44%
a) Presentations to analysts and the financial calendar
Such presentations are an important source of information from which conclusions on
the financial performance of the company can be drawn. Financial investors find it
useful to consult both the most up-to-date presentations and the list of experts which
have analysed the company. The data confirms that companies have little inclination to
disclose such data on a web-site (41%). However, when such information is disclosed,
the levels of availability (92%) and updating (85%) are good. There is little tendency to
give lists of analysts who have examined the company (19%) (251). The financial
calendar is an optimum indicator of a company’s organizational capacity. This study
only considered calendars with all the main dates of the financial year (16%).
b) Press coverage and financial press releases
A company’s interest in economic disclosure on the web is shown by a well-structured
press office on the site. This research considered press coverage and financial press
releases about. Particular interest was taken in examining the degree of diffusion of
special sections, the means of communication adopted and the presence of an archive
and an internal search engine.
A satisfactory number of press releases was found 66% compared to press coverage
(16%), but only 8% featured a distinction between categories of information. The date
and the subject name (94%) are fundamental to the comprehension of the degree of
updating and contents. The inclusion of an archive is always very welcome (36%)
(214). Material from the previous years is enough as it tends to lose value as time
passes. Only 10 out of 214 company sites had an internal search engine.
The way the press release section is organized is indicative of a company’s approach to
the Internet. In the writers’ opinion, the information should be classified according to
type and given a date and title. This would make it much easier to use. Few companies
appear sensitive to these needs. Generally, very few sites had a well-organized press
section with an archive.
14
Models of financial disclosure on the Internet: a survey of italian companies
c) Stock market quotations
Three types of stock market information were collected from the sites: market
consensus, quotation prospects and market prices. Market consensus was featured on
only 10% of sites (251), but quotation prospects were included by nearly all the newest
companies (belonging to Nuovo Mercato mostly). The most commonly found
information concerned market prices (46%). There appears to be a satisfactory degree of
diffusion of data relating to market prices, but little attention is paid to the means of
presentation. Half the companies had directly inserted quotations on the site, but none
had comments on this data or graphs. When the information is indirect, companies
appear to have made very little effort to process it; but by its very nature, this type of
data needs to be continually updated, which is an added expense for a company. If a
business does not consider its web-site to be a fundamental means of communication
requiring investment, it will remain an extra and its cost will be minimal.
5.2 Information of an institutional nature
Here the following main points were examined (table 7).
Table 7 – Information of an institutional nature
Some variables investigated Numerator (yes) Base %
Group structure 145 251 58%
Descriptive sheets for the main firms 77 145 53%
Owner assets 72 251 29%
Management 137 251 55%
Date up-dating 47 196 24%
Description of extraordinary operations 7 251 3%
This information will give a complete picture of the company under investigation. The
optimum situation is when the structure of the group is presented by means of graphs
with percentages, so as to render transparent control and connections between firms. For
the main firms within the group, it would be hoped to find a descriptive sheet displaying
the main features: geographical location, role within the group, turnover, invested
capital. As for the parent company, it would be interesting to see: a) owner assets, b) a
list of management, with a presentation note showing who governs the whole financial
complex. Group structure can change as a result of extraordinary operations. When this
happens, it is important to dedicate some space to an explanation of the conditions and
consequences. The date of the latest update is essential without it the user cannot decide
if owner assets refer to the present or to the past.
Finding all the above details indicates a desirable and satisfactory degree of
transparency and clarity, which, unfortunately is not always the case. In fact, only 58%
of sites (251) give the group structure. Companies often use simple lists without giving
the participation percentage. Information such as this is hardly exhaustive, if it is
considered that descriptions of control and inter-relation between firms in a group is
only found on 53% of sites (145, number of companies giving group structure) and the
definition of owner assets in 29% (251). It can be seen that there is little sensitivity to
disclosing information of an institutional nature.
As a confirmation of this, there is also some information on management (55%), usually
a simple list of names (except for Nuovo Mercato, the only segment which gives more
details). Very unsatisfactory is the situation regarding the date of the latest update
15
Francesco Avallone - Monica Veneziani
(24%). Group structure and management are subject to change even over short periods
of time. Not only should the date be given, but also any changes that have occurred. A
notice and a comment explaining the situation both before and after should be given,
thus making the information clear, complete and transparent. Unfortunately, not one
single case like this was found. Companies tend to be reserved in this respect, as was
seen in the all voluntary disclosure section.
In conclusion, it must be emphasized that some companies, (particularly MIB 30) have
a section on Corporate Governance on which can be found: the overall approach,
committee descriptions, stock option plans. Various documents such as: AGM
regulations, the statute, self-disciplinary code and ethical code, letter to shareholders can
be downloaded.
5.3 Business model information
Voluntary disclosure of strategic information will be dealt with here to see whether,
from the data given on the site, on one hand it is possible to identify the strategic
choices adopted and their results, and on the other the main factors which create value.
It was decided to select three main subject areas (table 8):
a) information about the company and its strategies;
b) products;
c) market and competitors.
Table 8 – Business model information
Some variables investigated Numerator (yes) Base %
Company history 189 251 75%
Mission 175 251 70%
Business areas 128 251 51%
Products 193 251 77%
Quality control 54 251 21%
Research 42 251 17%
Operative data 71 251 28%
SWOT analysis 1 251 1%
Competitor analysis 1 251 1%
Market share 20 251 8%
Market development 29 251 12%
a) Information about the company and its strategies
The most frequent disclosures on the site regard some basic elements such as: company
history, mission, corporate strategy and businesses areas. These elements form the
boundaries into which company strategy can be explained analytically. Company
history, featured on 75% of sites, is very important for understanding the origins,
development, fundamental choices, key people and strategic orientation which have
shaped the company. Often the mission is part of the company history. It would be
better to have a link, so as to separate it from the rest of the material. The mission (70%)
gives an individual company its own character and helps understand its strategic choices
on both an organizational and productive/commercial level. Next to the mission, it is
desirable to find, on a separate link, the business areas with an introductory comment
for each one. Such information was found on only 51% of sites and often consisted of a
simple list of business areas with an indication of general order.
16
Models of financial disclosure on the Internet: a survey of italian companies
It can be noted from these primary investigations that what companies tend to disclose
is reduced to the level of an analysis. It has emerged that segmental report is available in
16% of sites, driver values are present in 12% of cases, the same as for the description
of the business model (12%) and investment choices (13%), where the sum, not the
type, is mentioned. Even rarer is disclosure about logistics (6%) and value chain (1%).
On the basis of this data, it can be said that there is a high level of reserve among
companies10.
b) Products
Products and services can be dealt with separately. 77% of sites (251) had an annotated
list with comments and often with pictures. 61% had information concerning the
business premises. The reason for such good results is that, in many cases, the site
originated for commercial purposes. However, it did not develop towards integrated
company communication. To support this, there is more specific information relating to
production. Actually, the percentage decreases noticeably in relation to specific data
(new product development (23%), research (17%), quality control (21%), operative data
- customer numbers, sales volume, segment data - 28%, commercial structure (30%),
portfolio orders - 4%). Also here, there is a tendency to communicate information of a
general nature, with a reasonable degree of diffusion. Only in limited cases can the user
access analytical data.
c) Market and competitors
From this research, it emerges that Market Overview ‘Perfumo and al. (2002)’ is not a
subject of particular interest to most companies. The context in which they operate and
through which company strategies are interpreted, are not explained. The only
information available is on the market share (8%), for which no source is given, and the
expected development of the market (12%), which gives the first example of forward
looking information available on the Internet.
In the writers’ opinion, the optimum situation is the one in which there is a special link
onto which the company can put a description of the features of the sector to which it
belongs and the main markets in which it operates, with predictions of development,
complete with a summary on the main competitors, highlighting the various market
shares. The aim being to inform the user of the area in which the company operates so
that an appropriate use of all the information on the site can be made.
5.4 Other information
In conclusion, some brief thoughts on two documents that, given their nature, should be
included in this survey: social and environmental report. Neither were found to be well
represented: social report 3% (251) and environmental 5% of cases11.
The tendency of the listed companies to communicate on the Internet can now be
defined, the results of each variable of the study having been given. But, in order to give
10
Further reading on this subject: Salvioni D. M. (edit by, 2002) “L’efficacia della comunicazione economico-
finanziaria e l’analisi della concorrenza” (The effectiveness of the Financial Communication and the competition
analyse), Turin: Giappichelli.
11
The reference base used is all the companies with a site, as the number of quoted companies using such
reports, regardless of publication on the web, was not available.
17
Francesco Avallone - Monica Veneziani
the complete picture, it was deemed necessary to process further the data collected (to
be dealt with in the part B).
6. Form and contents of the financial disclosure
In this section a conceptual model will be given, thus the listed companies will be
ranked according to it and a summary picture of the Italian situation will be defined
(part B, section 8).
When focusing on form and contents, it can be said that a company can choose from a
variety of communication models (figure 1).
Figure 1 – Innovative communication or simply disclosure of compulsory information
High d) digital archives c) the “cutting edge”
INNOVATION IN
THE SHAPE a) traditional model b) culture of
Low transparency
Only mandatory data Wide voluntary disclosure
CONTENTS
The first model (chart A) shows the companies disclosing mostly mandatory
information, required by law that is backward-looking financial data, often without a
description of the company’s point of reference. Voluntary disclosure, when present,
tends to be generic, as in the case of data on history and company mission, given
without adequate details on critical factors of success and business areas. The site
cannot be visited completely in any foreign language, only Italian. Regarding form, the
company sites under examination do not use innovative means of communication. For
example: interactivity with the user is only by e-mail, financial reports are only
available in PDF. The general structure of the site and the passing from one page to
another is not always clear. The lack of an audio-video file means there is no question
of a multimedia dimension. The Internet, therefore, is used as a substitute for paper as
far as both the content and means of communication are concerned. This means that the
information on the web is the same as that found on mandatory paper documentation.
Consequently, the added value of Internet potential regarding quantity and quality of
information disclosed, timeliness, data processing, user interactivity, hypertext and
multimediality is low. In these circumstances, the main advantage derived by the user is
the ability to download mandatory documentation.
The opposing situation is given in the third model (chart C) showing companies that are
mainly orientated towards innovative means of disclosing mandatory and voluntary
information. In this model, more highly developed than the others, mandatory
information is given with detailed contents which show, not only past financial
performance, but also the characteristics of its business model, company operating data,
features of the market in which it operates, current strategies, research and development
plans and more. The means of communication is particularly innovative. Such sites
have a well-organised structure: reading routes, passing from one page to another and
entrance to external sites are all clearly marked. An internal search engine makes
research easy. Hyperlinks with other financial data is guaranteed by numerous internal
links, even for financial reports available in various formats, for example: PDF and
HTML which facilitates both reading and processing. The multimedia dimension is
18
Models of financial disclosure on the Internet: a survey of italian companies
shown by the presence of an audio-visual file. Interactivity is not only achieved through
e-mail, which only involves an individual user and the company, but also with FAQs
and forums which potentially extend to all web users and involve them in a dynamic
dialogue. The use of an interactive business model is especially innovative, and can be
seen as a model for interactive simulation (section 6.1).
Charts B and D show the intermediate situations. In chart B, there are the companies
which, as regards content, are orientated towards voluntary information, but the means
of communication uses only a limited amount of Internet potential. The last model
(chart D) includes companies that although offering mainly mandatory information are
orientated towards innovative communication.
The most highly developed model in terms of form and content is given in chart C. It
should be noted that it is not always in the company’s interests to apply this
communication model. In determining investment levels and degree of transparency, a
lot depends on the internal and external conditions of the company and the cost/benefit
correlation connected to, firstly, voluntary disclosures and secondly, communication via
Internet (FASB, 2001; Pirchegger and Wagenhofer, 1999).
6.1 The interactive business model
In this section an interactive business model (Quagli, 2002) will be dealt with, in a
summary form. That is an interactive simulation model which presents the business
model and the processing of forward looking information. One way of achieving such a
tool would be to sketch out the business model, in which the causal correlation between
results and value and cost drivers (described by the company according to their
respective importance) were given in graph form.
The company should give each variable, for example sales revenue, the trends of the
last 5-6 years, so that the user could calculate the development of turnover for the
following three years.
To achieve this result and predict future sales performance, the user could choose
between a repetition of the trend of the past two years and inserting a value directly.
A third solution, more complex than the other two, could be the expected development
of turnover following a thorough analysis by the user of causal factors. This would be
possible thanks to a description of the sales drivers. In this case, it would be possible to
examine how the development of the drivers could influence revenue by acting either
alternatively or simultaneously on the following:
a) value of the drivers which can be manoeuvred by the company;
b) effect of the drivers on revenue;
c) value of the drivers which are not controlled by the company.
The advantages of such an interactive instrument are manifold. In particular, this model
could:
a) let the user understand the managerial logic of the creation of value by using
certain levers;
b) let the user manage and interpret the information available even for the future;
c) give the user the opportunity to get to know the company thoroughly and elevate
the Internet potential, even where a company decides to apply the model to some
significant parts of the business, for example sales revenue, operating costs,
without listing the entire value creation system.
19
Francesco Avallone - Monica Veneziani
It is important to stress, however, that the inclusion of an interactive tool on a site could
require, both considerable effort in the construction of the whole model, necessitating
various options, calculation sheets and graphs, and continual updating. It would be as
well to include a disclaimer saying that the results calculated using the model depend
exclusively on the hypothetical data put in by the user. This would avoid the risk of
such data appearing to have been supplied by the management.
The interactive business model is one of the most innovative way of communicating on
the web. As there is a complete absence of such an instrument in Italy at the moment, it
could be an area for future development in web communication.
After the description of the conceptual model the listed companies will be ranked
according to form and content. The aim being to identify the gap between the situation
in Italy and the potential use of the Internet.
PART B
RESEARCH METHOD
7. Sample description
As already written in the beginning of this paper, the following empirical studies was
carried out among all the 277 Italian companies listed on the Milan Stock Exchange.
This sample, taken at 30th June 2001, has been studied setting grate store by different
markets which make it up.
Actually, the sample used to test the association between the level of internet disclosure
and gearing ratio (sections 9.1-9.2, hypothesis 1) does not consider insurance
companies, banks and holding that, by their nature, could have influenced the
significance of the research (only industrial and services sectors were considered).
These companies were excluded because their debt level could have negatively
influenced the results of the research. The difference between these and the other
companies was considered to be too great to make a comparison feasible. So, the
sample used for this latest analysis was composed of 166 companies, 39 of which
belonged to the “Nuovo Mercato” and 127 to the main market (MTA).
8. Disclosure levels and descriptive results
Like similar studies12, to measure the quantity of information provided by each
company and the innovation in the way of communicating, we assigned one point to
each potential item, as shown in table 9. Thus, 6 points were possible for accounting
mandatory information, 30 points for voluntary financial information and 36 overall. At
the same time, 8 points overall were possible to make a synthesis of the innovation in
the shape of communicating.
12
Ettredge, M., Richardson, V.J and Scholz, S. (2001) “The presentation of financial information at corporate Web
sites”, International Journal of Accounting Information Systems, 2: 149 – 168.
20
Models of financial disclosure on the Internet: a survey of italian companies
Table 9 – Financial disclosure checklist items
Item Points
Mandatory data
Complete financial statement 1
Auditors’ report 1
Complete six-monthly report 1
Auditors’ report 1
Additional statements 1
Highlights 1
Total 6
Voluntary disclosure
Segmental reporting 1
Financial ratios 1
Social Report 1
Environmental report 1
Draft financial analysis 1
Ownership structure 1
Management 1
Mission 1
Corporate history 1
Corporate strategies/business areas 1
Market development 1
R&D 1
Customers/suppliers/sales and distribution channels 1
Operating data (number of customers, volumes of trade, turnover etc.) 1
Press coverage 1
Press release 1
Value drivers 1
Market share 1
Investments 1
Business model description 1
Commercial structure 1
SWOT analysis 1
Competitor analysis 1
Quality control 1
Analysts meetings 1
Analysts 1
Corporate/financial calendar 1
Letter to shareholders 1
Market consensus 1
Stock exchange quotations 1
Total 30
Innovation in the shape
Changing language option 1
Possibility of personalizing the web site 1
Excel format download 1
Links inside balance sheet 1
Press release search engine 1
Forum 1
Sound/video connection 1
Press release area with distinct information classes 1
Total 8
21
Francesco Avallone - Monica Veneziani
In order to show the results on a graphs we have marked on the y axis the score of the
innovation in the shape of communicating and on the x axis an index (0 min, 1 max), the
result of the accounting point ratio assigned to each firms to its total.
Also a scatter diagram was chosen to identify the various points according to their
respective frequency. Each point corresponds to a filled-in circle of proportional area on
a nij frequency.
On the basis of the above regarding the various share markets which make up the Italian
Stock Exchange (graphs 1-4), it was expected that companies listed on the “Nuovo
Mercato” and STAR segment would have the strongest tendency towards the disclosure
of financial information on the Internet. The first because they are recently formed
companies belonging to ICT sectors and services with added value on the Internet.
These companies need to find risk capital to finance growth by strategic investments
with the aim of development and competitive reinforcement. They would certainly have
found benefit from being able to exploit such channels to establish an efficient and
lasting dialogue with present and future investors.
As regards the STAR segment, justification could be found in the same requisites
demanded for admission to the market. Among other things, companies belonging to
this segment must satisfy specific requirements regarding company disclosure. In
particular, these companies must publish financial reports, six-monthly and quarterly
reports and press releases on company sites.
Graph 1 – Dispersion and scatter diagrams for Ordinary Market Segment
Ordinary Market Segment
8
Innovation in the Shape
7
6
5
4
3
2
1
0
0 0,2 0,4 0,6 0,8 1
Contents
Ordinary Market Segment
8
Innovation in the Shape
6
4
2
0
-0,2 0 0,2 0,4 0,6 0,8 1
-2
Contents
22
Models of financial disclosure on the Internet: a survey of italian companies
The graphs above highlight that there is absolutely no correlation between innovation in
presentation forms of on line financial information and the effective financial contents
of the web site for listed companies belonging to the ordinary segment. Although there
is a distribution of data along the x axis, showing the scores of the sample investigated,
a concentration for all levels of communication around the reduced levels of innovation
(between zero and two) can be seen. Therefore, the companies in this segment have,
fairly low scores for both variables. This would emphasize that, except in a few rare
cases, there is very little tendency towards exploiting Internet potential as a means of
complete financial disclosure (especially for voluntary information). Innovative
presentation would be more attractive and stimulating for the stakeholder. The situation
for the other segments under investigation does not appear to differentiate much from
that mentioned above (see following graphs). The best communicative performances
were given by MIB 30 companies. These are the main Italian companies with deep-
rooted company culture towards transparency. Only here, were all the scores for the
contents index over 0.3. Despite the over simplification of such a statement, considering
the maximum score for complete mandatory information is about 0.2 (6/36), the
presence of values over 0.3 means that, contrary to other segments/markets examined,
all the companies included had a communication score of at least 11 (10.8 to be
precise). In a worst case scenario, all the companies could be put within a possibility
range. This should go from one extreme of complete mandatory information associated
with reduced voluntary disclosure (a score of 5 out of a possible 30), to the other
extreme of no mandatory information but with a modest amount of voluntary disclosure
(11 out of 30). This score is higher than the average obtained by the ordinary segment
and almost equal to the “Nuovo Mercato” (see the following table for average values).
Graph 2 – Dispersion and scatter diagrams for “Nuovo Mercato”
"Nuovo Mercato"
8
Innovation in the Shape
7
6
5
4
3
2
1
0
0 0,2 0,4 0,6 0,8 1
Contents
23
Francesco Avallone - Monica Veneziani
"Nuovo Mercato"
8
Innovation in the Shape 6
4
2
0
-0,2 0 0,2 0,4 0,6 0,8 1
-2
Contents
Graph 3 – Dispersion and scatter diagrams for STAR segment
STAR segment
8
Innovation in the Shape
7
6
5
4
3
2
1
0
0 0,2 0,4 0,6 0,8 1
Contents
STAR segment
8
Innovation in the Shape
7
6
5
4
3
2
1
0
-0,2 -1 0 0,2 0,4 0,6 0,8 1
Contents
24
Models of financial disclosure on the Internet: a survey of italian companies
Graph 4 – Dispersion and scatter diagrams for MIB 30
MIB 30
Innovation in the Shape
8
7
6
5
4
3
2
1
0
0 0,2 0,4 0,6 0,8 1
Contents
MIB 30
8
Innovation in the Shape
6
4
2
0
0 0,2 0,4 0,6 0,8 1
-2
Contents
An arithmetical average was used to show what has previously been shown in graph
form. The table 10 shows the values divided up according to the various markets and
segments analyzed.
Table 10 – Average scores of contents and form
Market/segment type Average “contents” score Average “form” score
Ordinary segment 9,36 0,61
“Nuovo Mercato” 13,24 0,9
STAR 12,43 1,18
MIB 30 17,6 1,4
Maximum score 36 8
As the table shows, no one market/segment seems to excel in terms of on line financial
information presentation. Considering the contents, therefore, the best communicative
performances were given by MIB 30 companies. This led us to concentrate our
investigations on Market capitalization (section 9.1, hypothesis 3).
25
Francesco Avallone - Monica Veneziani
9. Statistical analysis
9.1 The hypotheses
In addition, three hypotheses were tested to describing the extent of financial reporting
on the internet by Italian companies listed on the Milan Stock Exchange. The
hypotheses were selected after considering prior research on financial disclosure.
The first hypothesis is:
H1: There is a positive association between high debt level companies and the extent of
financial disclosure on the Internet
The relationship between disclosure quality and cost of equity is an important topic in
accounting theory and practice. Despite the different foci, almost all these theoretical
studies13 and their empirical research, e.g. Botosan (1997), Sengupta (1998), support a
positive correlation between greater disclosure and the reduction of the perceived risk.
At the same time, companies with high debt level could suffer from adverse selection
because their financial structure could increase the risk estimated by investors. Thus,
once the correlation between communication and perceived risk has been accepted, it
could be argued that these companies could reduce adverse selection through greater
disclosure. Since past empirical surveys show that Internet reporting by companies in
different countries is used to a large extent, the existence of a correlation between high
debt level enterprises and the tendency to disclose financial information on the Internet
has been investigated (figure 2).
Figure 2 – First hypothesis subject to confirmation: correlation between Internet communication and
companies with high debt level
Financial disclosure
on the Internet
Companies with Greater financial
high debt level disclosure
High risk perceived Reduction of the
perceived risk
13
Akerlof (1970) provides the first contribution which introduced realistic hypotheses on market functions appeared.
These attributed a growing importance to processes of production, data processing and use of information. It was
defined as the concept of “informative asymmetry”. This work gave the idea of complete communication through a
“market for lemon” sample.
26
Models of financial disclosure on the Internet: a survey of italian companies
The second hypothesis is:
H2: There is a positive correlation between the percentage of stocks on the market
(outstanding shares) and the extent of financial disclosure on the Internet
As regards this hypothesis, it is useful to note that shares issued must have proof of
trustworthiness to attract market operators. Trustworthiness is closely linked to a
company’s strategic and revenue credibility. In order to achieve this, a company must
be able to guarantee a flow of analytical financial communication which is reliable and
timely on its business activities.
On the basis of this supposition, it is obvious that companies listed on regulated
markets, especially those with a higher percentage of floating capital, want to find new
tools to keep such operating costs down. Such companies have to communicate
financial information to a large number of share-holders.
The core of the second hypothesis, therefore, is no longer the level of disclosure but
certain features of the Internet as a means of communication. In particular the
possibility of Internet becoming a channel for the diffusion of voluntary company
information, one that is both extremely simple and relatively low in cost. This new
means of communication can signal real change in communication. Traditional financial
details can be linked to other types of information thereby giving the user a more
complete picture. The Internet uses simple procedures and can be operated at relatively
low in costs, compared to traditional paper-based communication
Figure 3 – Second hypothesis subject to confirmation: correlation between communication on the
Internet and outstanding capital share
Companies with a
Listed Companies high level of
outstanding shares
Reliable and timely Difficulty in reaching
financial disclosure stake-holders
Attracting the interest Communication costs
of market operators
Disclosure on the
Internet (as a possible
solutions)
27
Francesco Avallone - Monica Veneziani
In summary, it has been identified the need to communicate financial information by
companies (hoping to attract market operators’ interest) and the difficulties that such
needs can cause to listed companies with a reasonable number of shareholders.
Therefore, this study also attempted to analyze the extent to which the Internet can be a
means of overcoming such problems. This was carried out by means of testing a
correlation between shareholder structure and the tendency to disclose financial
information on the Web (figure 3).
The third hypothesis is:
H3: There is a positive association between the percentage of market capitalization and
the extent of financial disclosure on the Internet
As previously seen, this third hypothesis indicates a further investigation of what has
already been discovered. As the MIB 30 companies were shown to be the most likely to
disclose financial information on the company web site and have the highest percentage
of market capitalization, a correlation between such percentages and estimated levels of
communication was investigated, using the above mentioned index.
9.2 Descriptive results
Linear correlation coefficient
The linear correlation coefficient ρ (“rho”) was used to calculate a linear correlation
between the variables investigated14. The covariance between the two variables was
considered, both of which expressed in standardized form:
cov (xy)
(1) ρ =
σx σy
Hypothesis 1
The correlation between financial communication and high levels of debt was carried
out in two phases. The data available was expressed on a scatter chart. Even though the
graph does not show the spread of the data with a linear correlation (whether direct or
inverted), we nonetheless proceeded to determine the ρ coefficient. The following table
11 shows the most significant values.
Table 11 – Correlation between financial communication and high levels of debt
Cov (xy) Σ2 x σ2 y σx σy ρ
- 2,295839458 16,71406144 32,04082771 4,088283434 5,660461793 - 0,099208448
X = gearing/leverage ratio
Y = contents score
14
This coefficient was used since all companies belonging to the Milan Stock Exchange were included, not only a
random selection.
28
Models of financial disclosure on the Internet: a survey of italian companies
The value of ρ shows there is no linear correlation between the two variables
investigated. Moreover, the coefficient sign (ρ<0) shows a movement towards an
inverse correlation area (-1< ρ<0). This means that, even if a very slight correlation is
found it is, in any case, inverse. The trend could even be that of a lowering of
communication levels as finance source structures worsen, justified by the wish of
hiding such a situation from the eyes of the stakeholders.
It has been decided to carry out further investigations into the basic hypothesis but, this
time, using as leverage ratio numerator, not everything that was not the net book capital
(owners’ equity) but exclusively the financial debts (therefore, due to suppliers, risk
funds, etc. have not been included).
The following results were obtained (table 12):
Table 12 – Correlation between financial communication and financial debts
Cov (xy) σ2 x σ2 y σx σy ρ
- 0,683885347 1,311567152 30,07581288 1,145236723 5,484141946 - 0,108887831
X = gearing ratio
Y = contents score
Even in this case, the coefficient does not have significant values for the identification
of a linear correlation. The same covariance sign repeats what has already been
established.
Hypothesis 2
It has already been stated that the very nature of the Internet with its ease of access and
relatively low costs means that companies can use it for communicating with minority
shareholders and private investors.
Even if the problems of potential shareholders are ignored, there is no doubt that the
current small shareholders, if suitably informed and involved, can favour company
development faithfully by underwriting any nominal capital increases and giving the
most significant signal of the quoted company’s credibility and validity by its behaviour
on the secondary market.
We have, therefore, assumed a directly proportional relationship between an increase in
financial disclosure on the Internet and the number of shareholders that do not hold a
relevant position in the share framework (share fragmentation increases and
consequently, outstanding shares). The share framework was analysed to establish the
existence of the aforementioned connection, using the communications on the
controlling interests given by companies according to art. 20 of D.Lgs. 58/1998.
A slight correlation emerged between the percentage of outstanding shares and
company communication on the Internet score (table 13).
Table 14 clearly shows an increase in the average score as the percentage of outstanding
shares increases. In general, the greater a company’s outstanding shares over 50%
(tending to be appear a Public Company) the greater the tendency to disclose complete
financial information15.
15
Current Italian Stock Exchange regulations provide for outstanding shares of at least 25% of total capital among its
minimum formal requirements for the admission of an Italian company to the stock market. The apparent contrast
between this requirement and some of the percentages considered in this research (for example outstanding shares of
less than 20%) can be justified considering that shareholding quotas, both direct and indirect, (and by the difference,
29
Francesco Avallone - Monica Veneziani
Table 13 – Correlation between the percentage of outstanding shares and company communication on
the Internet score
Cov (xy) σ2 x σ2 y σx σy ρ
21,00743257 31,02077757 394,1016305 5,569629931 19,85199311 0,189995153
X = percentage of outstanding shares
Y = contents score
Table 14 – Average and median contents score
Average contents score Median contents score
X < 20% 7,8 8
20%<= X <= 50% 11,50 12
X > 50% 13,38 13
X = Outstanding shares
Hypothesis 3
For the third hypothesis of this research, the correlation study results are presented as
follows (table 15):
Table 15 – Correlation between financial communication and company size
Cov (xy) σ2 x σ2 y σx σy ρ
2,179292151 31,21634513 129,0248491 5,58715895 11,35891056 0,034339008
X = score
Y = capitalization
Yet again, a linear correlation was found not to exist, thus confirming that the tendency
to disclose complete financial information does not depend on company size, and
therefore market capitalization, but on deep-rooted company tradition, which tends to be
found in those companies with a complex management structure (it is not by accident
that investors choose MIB 30 companies as the safest, attracting 80% of total
exchanges).
Conclusion and recommendations for further research
This research aims to define the state of the art of communication on the web by Italian
listed companies and to analyse the correlation between financial communication,
especially voluntary disclosure, and three variables (high debt level, outstanding shares
and percentage of market capitalisation).
In conclusion to the first part of this study, it can be said that in mid September 2001, a
large number of Italian listed companies only made mandatory or advisory disclosure
available on their web sites.
Moreover, these companies still show a preference for traditional means of
communication. It can be confirmed that among the companies analysed, there is still an
attachment to traditional paper-based ways and means. This is shown both in contents,
the outstanding shares quotas) are referred to the capital represented by ordinary shares which might not coincide
with the nominal capital and the O.P.A. (mandatory and voluntary) carried out after placement.
30
Models of financial disclosure on the Internet: a survey of italian companies
form and tools used for communication on web-sites. These companies seem to
consider the web as an “information deposit” rather than a dynamic means of
communication.
This situation could be caused by a lack of external stimuli, due to the lack of regulation
on web-site disclosure, the scant importance the market gives to information on the web
and Italian Stock Market intervention on communication of information on the Internet,
only addressed to certain segments of the market.
From statistical point of view, the results obtained can confirmed that there is a low
correlation only between the extent of financial disclosure on the Internet and the
percentage of stocks on the market.
The first tested hypothesis aimed to evaluate the possibility of extending to the Internet
the traditional and accepted relationship between financial communication and
perceived risk. Once this relationship has been accepted, it has been argued that
companies with high debt level could have reduce adverse selection through greater
disclosure. This meant testing the effective use of the instrument among companies
most in need of capital due to their financial structure. The fact that there was no
apparent correlation could mean that companies with high risk perceived do not
necessarily think that complete financial disclosure is useful. On the contrary, in some
occasions the opposite trend was noted. This trend may be justified by the wish of
hiding company financial structure from the eyes of the stakeholders.
In the second hypothesis, the aim was to evaluate how listed companies with a high
percentage of outstanding shares could use the Internet as a mean to disclosure financial
information. In this case, the “rho” coefficient would lead us to think there is a
correlation. It would appear that the Internet is beginning to be appreciated because of
its ability to reach a greater number of people at a considerably lower cost than by
traditional (paper based) means. No linear correlation between market capitalization and
the tendency to disclose complete financial information was found. This confirms that
the tendency to disclosure complete financial information does not depend on company
size.
However, such results seem significant to us, especially when it is considered that, as
for all forms of new technology, it is only a handful of companies dictating the trends.
Such companies, usually the most important, are in a position to use new technologies
because they have the necessary financial resources, the will to update their way of
doing business, their company image to consider and are always looking for a new
competitive advantage. However, in most cases, the impression is that adaptation to new
technology is more a case of a necessary imposition and a copying of leading
companies, motivated by the fear of appearing behind the times or of missing out on
new opportunities. This type of behaviour, reflecting the Schumpeterian concept of
technological innovation, proves to be an obstacle to the identification of the real
reasons which force a company to use this new means of disclosing its financial
information.
One of the limits of this research is certainly that only listed companies have been
examined, especially considering that their number is still relatively small, and
therefore, not ideal for showing the complete picture of the Italian companies.
Moreover, most of them are small and medium-sized firms (SME), often organized in
territorial systems. It would be interesting to carry out a similar research on a more
representative sample of the current entrepreneurial situation, in order to examine the
differences.
31
Francesco Avallone - Monica Veneziani
ACKNOWLEDGEMENTS
The authors would like acknowledge the professors A. Quagli and C. Teodori
for their help and encouragement throughout the writing of this paper. Every endeavour
has been made to identify the sources of all material used. We apologizes for any
omission. Any errors are the sole responsibility of the authors. The usual disclaimer
applies.
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Models of financial disclosure on the Internet: a survey of italian companies
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34
DIPARTIMENTO DI ECONOMIA AZIENDALE
PAPERS PUBBLICATI∗:
1. Arnaldo CANZIANI, La ricerca nelle scienze sociali: note metodologiche e pre-metodologiche,
novembre 1998.
2. Daniela M. SALVIONI, Controllo di gestione e comunicazione nell’azienda pubblica, aprile 1999.
3. Arnaldo CANZIANI, Giovanni Demaria nei ricordi di un allievo, luglio 1999.
4. Rino FERRATA, Tecnologia e mercato: i criteri di scelta dei metodi di valutazione, luglio 1999.
5. Giuseppe BERTOLI, Salvatore VICARI, L'impresa diversificata come organizzazione che apprende,
dicembre 1999.
6. Virna FREDDI, Attività economica e impresa nella concezione economicista, febbraio 2000.
7. Virna FREDDI, L'approccio Resource-based alla teoria dell'impresa: fattori interni e competitività
aziendale, febbraio 2000.
8. Maria MARTELLINI, Sviluppo, imprese e società, maggio 2000.
9. Arnaldo CANZIANI, Per la critica della teoresi zappiana, e delle sue forme di conoscenza,
dicembre 2000.
10. Giuseppe BERTOLI, Gabriele TROILO, L'evoluzione degli studi di marketing in Italia. Dalle origini
agli anni settanta, dicembre 2000.
11. Giuseppe BERTOLI, Profili di efficienza delle procedure concorsuali. Il concordato preventivo
nell’esperienza del tribunale di Brescia, dicembre 2000.
12. Daniele RONER, Domanda e offerta di beni economici. Rassegna critica dall’irrealismo neoclassico
alla differenziazione dei prodotti, marzo 2001.
13. Elisabetta CORVI, Le valenze comunicative del bilancio annuale. I risultati di un'indagine empirica,
luglio 2001.
14. Ignazio BASILE, Nicola DONINELLI, Roberto SAVONA, Management Styles of Italian Equity
Mutual Funds, agosto 2001.
15. Arnaldo CANZIANI, I processi competitivi fra economia e diritto, settembre 2001.
16. André Carlo PICHLER, L'Economic Value Added quale metodo di valutazione del capitale
economico e strumento di gestione aziendale, dicembre 2001.
17. Monica VENEZIANI, Economicità aziendale e capacità informativa del bilancio nelle aziende
cooperative agricole, dicembre 2001.
18. Pierpaolo FERRARI, La gestione del capitale nelle principali banche internazionali, febbraio 2002.
19. Giuseppe BERTOLI, Bruno BUSACCA, Il valore della marca. Modello evolutivo e metodi di
misurazione, marzo 2002.
20. Paolo Francesco BERTUZZI, La gestione del rischio di credito nei rapporti commerciali, aprile
2002.
21. Vincenzo CIOFFO, La riforma dei servizi a rete e l'impresa multiutility, maggio 2002.
22. Giuseppe MARZO, La relazione tra rischio e rendimento: proposte teoriche e ricerche empiriche,
giugno 2002.
23. Sergio ALBERTINI, Francesca VISINTIN, Corporate Governance e performance innovativa nel
settore delle macchine utensili italiano, luglio 2002.
∗ Serie depositata a norma di legge
35
Università degli Studi di Brescia
Dipartimento di Economia Aziendale
Contrada Santa Chiara, 50 - 25122 Brescia
tel. 030/2988.551-552-553-554 fax 030/295814
e-mail: segeaz@eco.unibs.it
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