The first case in the world of a mandatory requirement to disclose business model (BM) in the annual report is represented by Companies Act 2013 issued in the UK. The BM offers a simplified representation of a company’s key resources and of how these are combined to create value. For this reason, a systematic communication of BM should affect the way a company’s book value and its capability to generate earnings are per- ceived. The purpose of this work is to investigate the impact of mandatory BM disclosure on the value relevance of traditional financial measures. Focusing on a sample of UK listed companies over a six-year period, Ohlson model is utilized to assess the value rel- evance of book value and net income and their interactions with a dummy variable that accounts for the introduction of mandatory disclosure of BM. In line with previous stud- ies on non-financial disclosure regulations, results show that the introduction of the man- datory requirement to disclose BM has a negative moderating effect on book value of equity and a positive moderating effect on net income. As this is the first study to inves- tigate the effects of a mandatory BM disclosure regime, it could be of interest for both academics and standard-setters.
Keywords: business model, value relevance, regulation.
Simoni, L., Bini, L., Giunta, F. (2019). The effects of business model regulation on the value relevance of traditional performance measures. Some evidence from UK companies, Financial Reporting, n. 1, pp.83-111. DOI: 10.3280/FR2019-001003
