Integrated reporting, financial reporting quality and cost of debt

2020 ◽  
Vol 28 (3) ◽  
pp. 517-534 ◽  
Author(s):  
Mohammad Badrul Muttakin ◽  
Dessalegn Mihret ◽  
Tesfaye Taddese Lemma ◽  
Arifur Khan
Keyword(s):  
Financial Reporting ◽  
Stock Exchange ◽  
Reporting Quality ◽  
Financial Reporting Quality ◽  
Cost Of Debt ◽  
Inverse Association ◽  
Integrated Reporting ◽  
Financial Reports ◽  
Content Type ◽  
Debt Market

Purpose Although proponents of integrated reporting (IR) advocate that this emerging practice has the potential to transform corporate reporting, the eventuation of this expectation would depend on the incentive IR provides to firms. This study aims to examine whether IR is associated with cost of debt and whether IR moderates the relationship between financial reporting quality and cost of debt. Design/methodology/approach Based on insights drawn from information asymmetry and agency theories, the authors develop models that link IR and financial reporting quality with a firm’s cost of debt. The authors analyze 847 firm-year observations drawn from non-financial firms traded on the Johannesburg Stock Exchange, for the period between 2009 and 2015. Findings The authors find that firms that provide integrated reports tend to have a lower cost of debt than those do not provide IR. The authors also find an inverse association between financial reporting quality and cost of debt, and that integrated reports accentuate this association. The findings suggest that the debt market perceives value in the information presented in integrated reports beyond what is furnished in financial reports. Originality/value To the best of the authors’ knowledge, this study is the first to document evidence suggesting that the debt market perceives value in the information presented in integrated reports, beyond what is furnished in financial reports.

The relationship between cost stickiness and financial reporting quality in Tehran Stock Exchange

2018 ◽  
Vol 67 (9) ◽  
pp. 1550-1565 ◽  
Author(s):  
Mahdi Salehi ◽  
Nasrin Ziba ◽  
Ali Daemi Gah
Keyword(s):  
Financial Reporting ◽  
Design Methodology ◽  
Stock Exchange ◽  
Reporting Quality ◽  
Financial Reporting Quality ◽  
Statistical Software ◽  
Testing Hypotheses ◽  
Content Type ◽  
The Relationship ◽  
Cost Stickiness

Purpose The purpose of this paper is to investigate the relationship between financial reporting and cost stickiness in companies listed on the Tehran Stock Exchange. Design/methodology/approach Data of all Iranian manufacturing listed companies gathered for testing hypotheses during 2010–2016 and R statistical software are employed in order to analyzing data. Findings The results of this study indicate that there is a significant relationship between administrative, sale, material, labor and overhead costs and the financial reporting qualities of the companies under study. Originality/value The study focuses on relationship between financial reporting and cost stickiness in companies listed on the Tehran Stock Exchange, which is the first study of its type in Iran.

Family ownership and financial reporting quality: Iranian evidence

2018 ◽  
Vol 8 (3) ◽  
pp. 339-356 ◽  
Author(s):  
Mahmoud Mousavi Shiri ◽  
Mahdi Salehi ◽  
Fatemeh Abbasi ◽  
Shayan Farhangdoust
Keyword(s):  
Financial Reporting ◽  
Family Firms ◽  
Stock Exchange ◽  
Accounting Information ◽  
Reporting Quality ◽  
Audit Fees ◽  
Financial Reporting Quality ◽  
Family Ownership ◽  
Content Type

PurposeIn the process of reporting accounting information, the auditor’s objective is to detect possible misstatements and errors in accounting information. Audit evidence aids auditors in providing reasonable assurance about the quality of financial reporting. Studying the quality of family firms’ financial reporting is of higher importance relative to non-family firms due to lower risk of accounting manipulation. Therefore, the purpose of this paper is to examine the relationship between family ownership structure and financial reporting quality from an auditing perspective.Design/methodology/approachTo analyze the research hypotheses, the authors use a sample data consisted of 221 companies listed on the Tehran Stock Exchange (including 52 family and 169 non-family firms) over a five-year span from 2011 to 2015.FindingsUsing multivariate regression analysis of panel data, our results indicate that audit risk in family firms is lower than their counterparts. Likewise, the findings are indicative of lower audit fees paid by family firms as compared to non-family ones. The authors also find that auditors put more effort in family firms and thus audit effort is more significant for these kinds of firms.Originality/valueThe study focuses on family ownership and financial reporting quality in a developing country like Iran and the results of the study may be beneficial to other developing nations, as Iran stock market possesses some unique features which are not normally prevailing in other equity markets, even in the Middle East.

Financial reporting quality and share price movement-evidence from listed companies in Bangladesh

2020 ◽  
Vol 18 (3) ◽  
pp. 425-458
Author(s):  
Md. Mamunur Rashid
Keyword(s):  
Financial Reporting ◽  
Stock Exchange ◽  
Reporting Quality ◽  
Share Price ◽  
Financial Reporting Quality ◽  
Annual Reports ◽  
Developing Economy ◽  
Price Movement ◽  
Content Type ◽  
Qualitative Characteristics

Purpose The purpose of this study is to examine the effect of financial reporting quality (FRQ) on share price movement (SPM) of listed companies in an emerging and developing economy – Bangladesh. Design/methodology/approach The study analyzed 296 annual reports for the year 2015 and 2016 in examining the effect of FRQ on SPM. Ordinary least squares (OLS) regression model is used to examine the hypothesized relationship among the variables. A modified version of Lang et al. (2003) has been adopted in measuring the SPM. FRQ is measured using the qualitative characteristics approach as defined by the International Financial Reporting Standard Framework and used by Beest et al. (2009) and Braam and Beest (2013). Findings The study finds a positive association (though not significant statistically) between the FRQ and SPM in the country’s leading stock exchange (Dhaka stock exchange). Furthermore, the effect of enhancing quality on SPM is found to be stronger as compared to fundamental quality. Majority of the FRQ constructs demonstrate an improvement in the quality score in the year 2016 as compared to 2015 except for relevance. Research limitations/implications The key limitation of the study is that it focuses only on two years (2015 and 2016) annual reports data in measuring FRQ and its effect on SPM. Originality/value The study uses qualitative characteristics approach in measuring the FRQ and to examine its effect on SPM using the context of an emerging and developing economy – the case of Bangladesh.

Audit committee impact on the quality of financial reporting and disclosure

2016 ◽  
Vol 39 (12) ◽  
pp. 1639-1662 ◽  
Author(s):  
Mahdi Salehi ◽  
Mohammadamin Shirazi
Keyword(s):  
Financial Reporting ◽  
Audit Committee ◽  
Stock Exchange ◽  
Panel Data Analysis ◽  
Reporting Quality ◽  
Financial Reporting Quality ◽  
Fiscal Year ◽  
Corporate Disclosure ◽  
Content Type

Purpose The purpose of this study is to shed further light on the characteristics of an audit committee (AC) and its probable relationship with the quality of financial reporting and disclosure. Based on the findings of extant research that there are different factors that may have implications for the AC’ effectiveness, the authors posit an association between the aforementioned financial aspects and AC presence. Design/methodology/approach The authors test their hypotheses by performing panel data analysis on a sample of 100 companies listed on the Tehran Stock Exchange (TSE) during 2013-2014. The tests were conducted by using Eviews software. Findings Examining previously tested characteristics of an AC, the authors indicate that the number of AC meetings held during fiscal year is negatively associated with the quality of corporate disclosure, whereas AC expertise and size are positively associated with the quality firm’s financial disclosure. Their findings are also indicative of a non-significant relationship between other AC attributes and financial reporting quality (FRQ) except for AC independence, which is positively associated with FRQ. Finally, they provide some evidence that the size of a firm positively affects the quality of its financial reporting and disclosure. Research limitations/implications Although the study has been thoroughly considered and cautiously planned, some limitations have yet arisen. Initially, this research was conducted in an Iranian setting where the formation of ACs is on the verge of regulation; therefore, the data utilized for the study only contains the two-year period of ACs’ statutory activity. In addition, a lack of consensus on the precise measures of an AC’s effectiveness could be considered as a restrictive factor. Originality/value The authors’ study contributes to the AC literature by providing empirical evidence of an association between ACs’ different attributes and financial aspects in a newly regulated environment like the TSE. The results provided in this paper could be fruitful for auditors, regulators, institutional investors and policymakers.

Financial reporting quality and firms’ information environment: a case of Iranian firms

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Yasser Rezaei Pitenoei ◽  
Mehdi Safari Gerayli ◽  
Ahmad Abdollahi
Keyword(s):  
Financial Reporting ◽  
Capital Market ◽  
Stock Exchange ◽  
Reporting Quality ◽  
Information Environment ◽  
Financial Reporting Quality ◽  
Multivariate Regression Model ◽  
Content Type ◽  
Composite Measures ◽  
The Relationship

Purpose The purpose of this study is to investigate the relationship between financial reporting quality and information environment (IE) in firms listed on the Tehran Stock Exchange (TSE). Design/methodology/approach In this study, composite measures were used as the proxy to measure financial reporting quality and IE. In this regard, a sample of 1,490 firm-year observations of the firms listed on the TSE during the years 2008 to 2017 and a multivariate regression model was used to examine the research hypothesis. Findings Findings indicate that financial reporting quality has a positive relationship with firms’ IE. This result is robust to the alternate measure of financial reporting quality and endogeneity problem. Originality/value The present study is the first study to develop a composite measure for the firms’ IE in the Iranian capital market. As a result, it not only expands the theoretical literature on the firms’ IE but also helps policymakers, regulators, investors and financial reporting users make informed decisions.

scholarly journals Assessing Financial Reporting Quality of Listed Companies in Developing Countries: Evidence from Ghana

2019 ◽  
Vol 11 (9) ◽  
pp. 29
Author(s):  
Joseph Mbawuni
Keyword(s):  
Financial Reporting ◽  
Stock Exchange ◽  
Reporting Quality ◽  
Listed Companies ◽  
Sub Saharan Africa ◽  
Financial Reporting Quality ◽  
Financial Reports ◽  
Financial Reporting Standards ◽  
Sub Saharan

The adoption of International Financial Reporting Standards (IFRS) in Ghana is expected to improve the quality of financial reporting among companies in Ghana. This paper assesses the extent to which financial reports of companies listed on the Ghana Stock Exchange (GSE) meet financial reporting quality (FRQ) dimensions of IFRS. It was a descriptive study that employed two experienced professional chartered accountants who practice as independent auditors to use FRQ criteria to assess financial reports of 20 purposively selected companies listed on GSE for 2012 and 2013. Given the high inter-rater reliability (r = .96, 95% C.I., p < .0001), the findings indicate that, overall, FRQ of the listed companies meet FRQ standards by 56.48%. Generally, the financial reports were 60.95% faithfully represented, 51.01% relevant, 50.10% understandable, 40.09% comparable and 19.75% timely audited (or 80.25% untimely). Fundamental FRQ characteristics were more prevalent than enhancing FRQ. Poorly rated FRQ areas were in the use of historical cost as measurement basis, no use of graphs and tables to clarify information, no inclusion of comprehensive glossary, ratios and index, no information on adjustment in past accounting figures for future decisions, and no comparison of current and previous accounting periods and with those of other firms. The study concludes that FRQ of the listed companies is moderate but needs considerable improvement. Implications to theory, practitioners, policy makers and industry regulators are discussed. This study fills the dearth of empirical research in FRQ in IFRS-compliance companies in Sub-Saharan Africa in general and Ghana in particular.

scholarly journals An Empirical Evidence of the Value Relevance and Timeliness of Financial Reports in the Post Adoption of IFRS in Nigeria

2021 ◽  
Vol 2 (1) ◽  
pp. 16-25
Author(s):  
Saheed Ademola Lateef ◽  
Norfadzilah Rashid ◽  
Johnson Kolawole Olowookere ◽  
Abdullahi Bala Ado
Keyword(s):  
Financial Reporting ◽  
Value Relevance ◽  
Stock Exchange ◽  
Reporting Quality ◽  
Theory And Practice ◽  
Financial Reporting Quality ◽  
Reporting Standards ◽  
Financial Reports ◽  
Financial Reporting Standards ◽  
Ifrs Adoption

The emergencies of the globalization of accounting standards and other critical issue have been reported to reduce the cost of enhancing comparability, understandability, and producing supplementary information, and analysis of the accounting reports. This allowed many developing nations who do not want to be left behind to take a cue from the world's major economies to meet the international financial reporting standards (IFRS) that Nigeria has taken measures to converge equally. The study examines the effect of IFRS adoption on financial reporting quality of listed non-financial companies in the Nigerian stock exchange. Particularly, in the area of value relevance and timely loss recognition. The study used 63 non-financial companies’ annual reports listed on the Nigerian Stock Exchange (NSE) for the period of 2008 to 2018 (i.e., 5years pre-adoption and 5years post adoption). Multiple linear regression was used in analyzing the collected data via STATA software. The result shows a significant increase in the value relevance of financial reports after IFRS adoption. The study also showed that the identification of significant losses increased in the post-IFRS adoption era. Based on the result, the study suggests that the relationship between accounting measures on IFRS adoption and financial reporting quality indicates that both foreign and local investors can predict the future of market value of individual securities. Therefore, investor receives considerable information by knowing the price information on time that shows more value relevant. Finally, this study contributed to the theory and practice, as well as direction for further studies related to the financial reporting standards and the reporting quality.

Is integrated reporting associated with corporate financing decisions? Some empirical evidence

2019 ◽  
Vol 27 (3) ◽  
pp. 425-443 ◽  
Author(s):  
Tesfaye T. Lemma ◽  
Arifur Khan ◽  
Mohammad Badrul Muttakin ◽  
Dessalegn Getie Mihret
Keyword(s):  
Financial Reporting ◽  
Reporting Quality ◽  
Financial Reporting Quality ◽  
Integrated Reporting ◽  
Equity Financing ◽  
Corporate Financing ◽  
Content Type ◽  
Financing Decisions ◽  
Financing Strategy ◽  
The Relationship

Purpose The emerging practice of integrated reporting (IR) has raised curiosity regarding how it impacts on firms and their stakeholders. The purpose of this paper is to examine whether a firm’s decision to provide integrated reports is associated with its financing decisions and whether financial reporting quality mediates the relationship. Design/methodology/approach A usable sample of 832 firm-year observations was employed based on a dataset drawn from companies listed on the Johannesburg Securities Exchange (JSE) for the period between 2009 and 2015. Findings The findings show that firms that provide integrated reports tend to have lower levels of leverage, and this effect is partially mediated through financial reporting quality. We further document that the partial effect of financial reporting quality on leverage is stronger for firms that provide integrated reports than is the case for other firms. The findings suggest that IR enables firms to employ equity financing, which is a more informationally-sensitive source of capital than debt financing. Originality/value This study is the first to document evidence suggesting that management can draw on IR in devising optimal financing strategy.

The effectiveness of audit committees for low‐ and mid‐cap firms

2011 ◽  
Vol 26 (7) ◽  
pp. 623-650 ◽  
Author(s):  
Won Sil Kang ◽  
Alan Kilgore ◽  
Sue Wright
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Audit Committee ◽  
Stock Exchange ◽  
Reporting Quality ◽  
Audit Committees ◽  
Financial Reporting Quality ◽  
Governance Reform ◽  
Content Type ◽  
Significant Measure

PurposeThe purpose of this paper is to investigate the effectiveness of recommendations made by the Australian Stock Exchange (ASX) relating to audit committees in Australia, and whether they have improved financial reporting quality for low‐ and mid‐cap listed firms.Design/methodology/approachThe authors examine the relation between characteristics of the audit committee and financial reporting quality for listed companies not mandated to comply with these requirements, i.e. low‐ and mid‐cap firms. For a sample of 288 firms, the authors regress measures of audit committee independence, expertise and activity and size on alternative measures of earnings management.FindingsA significant association is found between all three characteristics and lower earnings management. The significant measure for independence is the proportion of independent directors on the audit committee; for expertise, it is that at least one member of the audit committee has an accounting qualification; and for activity and size, it is the frequency of audit committee meetings.Practical implicationsThe results provide support for the mandatory establishment of audit committees for the top 500 (high‐ and mid‐cap) firms introduced by the ASX and suggest those audit committee characteristics which could improve financial reporting quality for low‐ and mid‐cap firms.Originality/valueThe paper examines low‐ and mid‐cap firms in order to complement previous similar studies done for high‐cap firms. It identifies the effects on financial reporting quality of voluntarily choosing to have an audit committee and of the choice of audit committee characteristics, in the period after substantial corporate governance reform. It includes a new measure among audit committee characteristics, industry expertise, which is required in Australia and is new to the literature.

The Determinants of the Financial Reporting Quality: Empirical Evidence for Romania

2021 ◽  
Vol 19 (162) ◽  
pp. 301-319
Author(s):  
Claudia Cătălina CIOCAN ◽  
◽  
Mihai CARP ◽  
Iuliana GEROGESCU ◽  
◽  
...  
Keyword(s):  
Financial Reporting ◽  
Stock Exchange ◽  
Reporting Quality ◽  
Financial Reporting Quality ◽  
Governance System ◽  
Macroeconomic Factors ◽  
Financial Reports ◽  
The United Kingdom ◽  
Big 4 ◽  
Corporate Governance System

The issue of the financial reporting quality has aroused the interest of several researchers whose views converge on the idea that it can be influenced both by factors related to the internal environment of the company, the corporate governance system, the activity of auditors and not only, and also by macroeconomic factors, such as the legal and political system of a country or community or certain accounting/ tax policies. The objective of the research is to highlight, starting from a model validated by Iatridis (2011) for companies in the United Kingdom, the way in which microeconomic factors influence the financial reporting quality of Romanian companies listed on the Bucharest Stock Exchange. The analysis is carried out for the 2013-2019 period. The results indicate that the companies that produce high quality financial reports are large and generally have a high operating cash flow rate, relatively low provisions and disclose more information. Also, these companies are audited predominantly by auditors who are not part of the BIG 4 group.

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