Reviewed by Peter J. Clarke University College Dublin
During the decades following World War II, the information content of company annual reports increased significantly in many developed countries, resulting mainly from the need to provide information for investors and other interested parties. For teaching and research purposes, this information can be classified as either mandatory or voluntary, and several countryspecific studies detail how financial reporting practices evolved over time.
This book is concerned with voluntary, or nonmandatory, disclosure in annual reports of companies in The Netherlands. The book, originally a Ph.D. thesis, is based on a sample of about 30% of the companies (excluding financial and colonial companies) listed on the Amsterdam Stock Exchange over the period 1945 to 1983. For logical reasons, nonquoted companies were not investigated. In 1984, the adoption of the Fourth Directive on Company Law within the European Community ended the period during which Dutch financial reporting regulation was free to develop under the influence of national factors. This longitudinal study is concerned with a total of 13 disclosure items; namely, sales (or turnover), comparative figures, tax costs, tax liabilities, labor cost data, number of employees, consolidated financial statements, funds statements, current cost income, current cost balance sheets, earnings per share, industry sales/income, and geographical sales/income. In turn, these 13 disclosure items are grouped into nine disclosure areas.
Chapter two considers the theoretical views on voluntary disclosure, particularly in relation to economicsbased models of disclosure behavior. The next chapter considers voluntary financial reporting in The Netherlands specifically and documents the rise and the fall of financial reporting in terms of the “Dutch systems” of financial reporting and regulation. Developments are traced from the French Code de Commerce of 1807 to the present. This chapter establishes that there was a widespread perception in The Netherlands of the importance of voluntary improvements in disclosure. Chapter four provides a literature review of the main approaches to empirical disclosure research and discusses the disclosure items selected and companies studied.
Chapters five and six are concerned with analysis of the data gathered. At a most elementary level, it was found that there was, in fact, a rather substantial extent of voluntary disclosure in the Dutch annual reports studied, and that the 1970 Act on Annual Financial Statements had a significant influence on increasing those disclosures. The 1970 Act codified a number of practices, including consolidations, and spurred further voluntary disclosures such as employee numbers, earnings per share, and geographical segmentation of operating income. In terms of association between firmspecific factors and the extent of disclosure, size was found to be the most important explanatory variable. This result was established using multiple regression.
Despite the limitations recognized by the author; e.g., a focus on listed companies and the selection of disclosure items, this Ph.D. thesis contributes significantly to our understanding of both voluntary and mandatory financial disclosure practice in The Netherlands. It is unlikely that the book will become a recommended text, but it is an invaluable source of reference for those investigating corporate disclosure practices. Over 400 references are cited. It also contains important material for those with an interest in accounting history since some reference is made to development both in the U.K. and the U.S. Also, the book highlights that certain aspects of financial reporting are of relatively recent origin. For example, before World War II the practice of disclosing comparative figures in the profit and loss account and balance sheet was rare, while the inclusion of funds flow statements did not appear in the Netherlands until the late 1950s.
