Business Model Disclosures, Market Values, and Earnings Persistence: Evidence From the UK

This paper investigates the consequences of business model (BM) disclosures. Content analysis is used to assess the mandatory disclosure of BM in in 75 publicly listed companies' annual reports across a three-year period (2014-2016). The research applies a novel content analysis methodology that considers the way in which the relevance of BM disclosures is dependent on which particular BM a given company adopts. The empirical results show notably low levels of BM disclosure and no significant association between BM disclosures and market value. However, we find that BM disclosure provides insights into earnings quality by means of enhanced earnings persistence. These findings reveal that information about the BM itself does not make a difference to investors when it is not linked to financial outcomes. Instead, BM acts as a framework for organizing other disclosures, and provides complementary information about value generation, helping users understand how earnings are generated. These results are important for informing the policy-making process around extra-financial disclosures (e.g., EU Directive 2014/95/EU) and answer calls for research to inform future improvements to corporate and integrated reporting.