Presence of professional accountant in the top management team and financial reporting quality

2020 ◽  
Vol 16 (2) ◽  
pp. 237-257
Author(s):  
Md Mamunur Rashid
Keyword(s):  
Financial Reporting ◽  
Value Relevance ◽  
Top Management Team ◽  
Reporting Quality ◽  
Management Team ◽  
Financial Reporting Quality ◽  
Top Management ◽  
Content Type ◽  
Qualitative Characteristics

Purpose The purpose of this study is to examine the effect of the presence of professional accountants in the top management team (TMT) on financial reporting quality (FRQ) in public limited companies using the context of Bangladesh, which is an emerging economy. Design/methodology/approach This study adopts a modified version of Beest et al.’s (2009) FRQ index to measure the quality of information published in 351 annual reports of listed companies in Bangladesh. It also uses a qualitative characteristics approach to measure the quality of financial reporting, as defined by the International Financial Reporting Standards framework 2018, as opposed to an accrual or value relevance approach that solely depends on the information disclosed in the financial statements. Findings This study finds that the presence of professional accountants in the TMT is positively and significantly associated with FRQ. The findings also show that the sample companies disclosed better quality information in the enhancing qualitative characteristics category, as compared to the fundamental qualitative characteristics category. Originality/value This study uses the context of Bangladesh to explore a new type of relationship between the presence of professional accountants in the TMT and FRQ.

Top Management Team Characteristics and Financial Reporting Quality

2019 ◽  
Vol 94 (5) ◽  
pp. 349-375 ◽  
Author(s):  
Dana Zhang
Keyword(s):  
Financial Reporting ◽  
Top Management Team ◽  
Reporting Quality ◽  
Economic Incentives ◽  
Individual Characteristics ◽  
Management Team ◽  
Financial Reporting Quality ◽  
Top Management ◽  
Team Characteristics ◽  
The Impact

ABSTRACT The accounting literature often views managers as individuals whose financial reporting decisions are determined by their economic incentives and individual characteristics. However, managers typically work in a team and most decisions have at least some input from other members of the team. This study examines the impacts of two top management team (TMT) characteristics on financial reporting quality. The results indicate that background homogeneity and long-shared working experience are each distinctly related to a higher likelihood of restatements. Additional tests document that team homogeneity and shared experience also are positively associated with discretionary accruals for firms with income-increasing earnings management incentives. Moreover, the impact of TMTs on financial reporting quality varies with the proportion and tenure of independent directors. These findings indicate that top management team characteristics are important determinants of financial reporting quality. JEL Classifications: G34; M14; M41; M54.

Asymmetric financial reporting quality and firm size: conditional evidence from an emerging market

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
T.G. Saji
Keyword(s):  
Financial Reporting ◽  
Information Quality ◽  
Value Relevance ◽  
Emerging Market ◽  
Reporting Quality ◽  
Financial Reporting Quality ◽  
Content Type ◽  
Listed Firms ◽  
Reported Earnings

PurposeThe mandatory adoption/convergence of IFRS has increased the information quality of reported earnings in equity markets across the globe. The purpose of the study is to explore whether the mandatory convergence of Indian Accounting Standards (Ind AS) with International Financial Reporting Standards (IFRS) affect the financial reporting quality of listed firms in India.Design/methodology/approachThe sample includes 355 non-financial publicly listed firms on National Stock Exchange (NSE) of India with 1,065 firm-year observations. The authors use models similar to Jones (1991), and DeFond and Jiambalvo (1994) to investigate value relevance in the period “1st January 2017 to 31st December 2019”. The study uses the quantile regression (QR) analysis to verify our hypothesis.FindingsThe findings suggest that IFRS convergence process adds value to accounting quality of reported earnings in Indian stock market. The authors' QR estimations produce collaborating evidence on the uneven impact of IFRS across quantiles and the financial reporting quality skewed in favour of investors of high-valued firms.Research limitations/implicationsThe effects of convergence with IFRS in value relevance of financial statements could be reinforced by considering alternate accrual models and incorporating more accounting measures on an expanded sample of stocks from several global markets.Practical implicationsPresently, convergence of local accounting standards to IFRS in India is only partial. The findings may produce useful insights for regulators and standard setters to further increase the value relevance of financial reports whilst they move towards full convergence.Originality/valueThe study explores the information quality of reported earnings of Indian listed firms in post-IFRS convergence period, which is not properly investigated in the literature. Moreover, the research is unique in terms of applying QR estimations to examine the value relevance of IFRS-converged financial reporting from the emerging market perspective.

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.

Effects of leadership and accounting capacity on accountability through the quality of financial reporting by public organisations in Vietnam

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Yen Thi Tran ◽  
Nguyen Phong Nguyen ◽  
Trang Cam Hoang
Keyword(s):  
Public Sector ◽  
Financial Reporting ◽  
Reporting Quality ◽  
Financial Reporting Quality ◽  
Equation Modeling ◽  
Content Type ◽  
Research Results ◽  
Public Organisations ◽  
The Impact

Purpose By drawing on the institutional theory and contingency theory, this study aims to examine the effects of leadership and accounting capacity on the quality of financial reporting and accountability of public organisations in Vietnam. Furthermore, this paper is to determine the impact of financial reporting quality on accountability. Design/methodology/approach The research model and hypotheses have been tested by partial least squares structural equation modeling, with 177 survey samples obtained from accountants and managers working in the public sector in Vietnam. Findings The research results indicate that leadership and accounting capacity have a positive effect on financial reporting quality; leadership and accounting capacity positively influence accountability; and the quality of financial reporting has a positive impact on accountability. Research limitations/implications The research results provide empirical evidence of the direct impact of leadership and accounting capacity on financial reporting quality and accountability of public organisations in a developing country. Moreover, the current work also provides important evidence for the impact of financial reporting quality on accountability. Practical implications Public sector organisations must realise that leadership and accounting capacity play a vital role in the accounting reform process. Public institutions likewise need to pay attention to develop accounting capacity and promote leadership. Moreover, the results respond to the continuing call for increased citizen trust in public organisations. Originality/value To the best of the authors’ knowledge, this study is the first to examine the chain from leadership, accounting capacity, financial reporting quality and accountability in the context of public sector organisations in an Asian transition market.

Comparing the financial reporting quality of Chinese and US public firms

2018 ◽  
Vol 8 (4) ◽  
pp. 399-424
Author(s):  
Kareen Brown ◽  
Fayez A. Elayan ◽  
Jingyu Li ◽  
Zhefeng Liu
Keyword(s):  
Financial Reporting ◽  
Spillover Effect ◽  
Abnormal Returns ◽  
Reporting Quality ◽  
Spillover Effects ◽  
Financial Reporting Quality ◽  
Chinese Firms ◽  
Content Type ◽  
Regulatory Actions

Purpose The purpose of this paper is to investigate whether US regulatory actions around reverse mergers (RM) have exerted any spillover effects on the Chinese firms listed in China and whether Chinese firms have exhibited lower financial reporting quality than their US counterparts. Design/methodology/approach To test the possible spillover effect, this paper calculates three-day cumulative average abnormal returns (CAAR) and the aggregate CAAR for a series of US regulatory actions in 2010 and 2011. The study then compares the accrual quality, conditional conservatism, and information content of accruals of Chinese firms and US firms. Findings The paper documents a spillover effect of US actions around RM on Chinese stocks listed in China. Overall results do not support the perception that Chinese firms have lower financial reporting quality than their US counterparts. Research limitations/implications While this study provides evidence consistent with investors perceiving poor financial reporting quality among Chinese firms, that perception is not justified by empirical evidence. Practical implications Investors need not be overly concerned about the financial reporting quality among the Chinese firms when they make asset allocation decisions. Social implications A reality check is important given that perceptions may be outdated, biased, misleading, and costly. Originality/value This study puts the financial reporting quality of Chinese firms into perspective helping global investors assess information risk for optimal resource allocation.

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.

Quality of financial reporting in the Asia-Pacific region

2016 ◽  
Vol 26 (4) ◽  
pp. 543-560 ◽  
Author(s):  
Qaiser Rafique Yasser ◽  
Abdullah Al Mamun ◽  
Irfan Ahmed
Keyword(s):  
Financial Reporting ◽  
Reporting Quality ◽  
Developed Countries ◽  
The Philippines ◽  
Asia Pacific ◽  
Financial Reporting Quality ◽  
Pacific Region ◽  
Asia Pacific Region ◽  
Content Type

Purpose The main purpose of this paper is to examine the causes and interrelations between ownership composition and financial reporting quality of firms in the Asia-Pacific region. Design/methodology/approach The study uses panel data for 420 firms for the period 2011-2013 (three years) from Australia, Singapore, Malaysia, the Philippines and Pakistan. Findings Overall, the authors find that ownership concentration is positively associated with the financial reporting quality. However, institutional ownership and foreign ownership are positively associated with financial disclosure in developing countries. Further, the result indicates that institutional and public ownership is positively associated with financial reporting in developed countries. Among the control variables, the authors find that larger firms are negatively correlated with financial reporting quality in Asia-Pacific. Originality/value These results highlight the highly individualized effects of blockholders and the need for research to further understand the mechanisms through which shareholders impact financial reporting quality.

The effect of internal controls on financial reporting quality in Iranian family firms

2019 ◽  
Vol 9 (3) ◽  
pp. 254-270 ◽  
Author(s):  
Mahmoud Lari Dashtbayaz ◽  
Mahdi Salehi ◽  
Toktam Safdel
Keyword(s):  
Financial Reporting ◽  
Family Firms ◽  
Negative Relationship ◽  
Reporting Quality ◽  
Internal Controls ◽  
Financial Reporting Quality ◽  
Content Type ◽  
Listed Firms ◽  
Significant Negative Relationship

PurposeThe purpose of this paper is to investigate the relationship between internal controls weakness and financial reporting quality and the effect of family ownership on the mentioned relationship in Iranian listed firms.Design/methodology/approachIn this way, the authors included the number of 139 firms from 2013 to 2017, of which 28 were family firms. The hypotheses are analyzed based on panel data and means comparison.FindingsThe results illustrated that weakness in internal controls has a significant negative relationship with financial reporting quality. In other words, internal controls weakness decreases the quality of financial reporting quality. Moreover, the results showed that being familial does not affect the aforementioned relationship.Originality/valueConsequently, there is no suitable criteria to distinguish family firms and there is a need to take them into serious consideration because very few studies have been conducted focusing on this issue in Iran, as it is considered an argumentative subject to be discussed in the Iranian market.

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