The level of compliance with the Italian Legislative Decree No. 254/2016 and its determinants: Insights from Italy

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.