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.

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.

The usefulness of IFRS-compliant reports: perceptions of Sri Lankan investors and lenders

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Saman Bandara ◽  
Michael Falta
Keyword(s):  
Sri Lanka ◽  
Financial Reporting ◽  
Reporting Quality ◽  
Perceived Usefulness ◽  
Survey Study ◽  
Annual Reports ◽  
Sri Lankan ◽  
Developing Economy ◽  
Content Type ◽  
Context Specific

PurposeThis paper aims to examine differential perceptions of lenders and investors on (1) the use, perceived usefulness, importance and adequacy of annual reports, (2) the importance of qualitative characteristics (QCs) and (3) the perceived impact of International Financial Reporting Standards (IFRS) on financial reporting quality (FRQ) in Sri Lanka.Design/methodology/approachA questionnaire survey study of practising professionals consisting of Sri Lankan investors (N = 214) and lenders (N = 235).FindingsIn relation to (1), lenders and investors rank three out of ten information sources ahead of the remaining seven: both include annual reports and personal knowledge. However, the highest average response for lenders is direct communication with clients, and for investors, it is stock market publications. Within annual reports, both decision-makers identify financial statements as the most useful part. Concerning (2), they both identified understandability as the most important QC followed by timeliness. Relevance ranked last, surprisingly. In relation to (3), both groups perceived that the new IFRS reporting environment improved the FRQ compared to the previous Sri Lanka Accounting Standards regime.Practical implicationsRanking understandability as the most important QC in terms of decision usefulness contradicts IASB's categorisation. The authors provide empirical data on the perceived degree of success of adopting IFRS in a developing economy.Originality/valueThe authors design a decision-oriented (lending vs investing) and context-specific (IASB's financial reporting framework) questionnaire to examine the perceptions of key capital providers separately on the issues mentioned above in “Purpose” within a developing economy. The survey fits into two aspects of the decision-useful theory: useful to make what decisions and useful to whom.

Influence of internal audit reporting line and implementing internal audit recommendations on financial reporting quality

2019 ◽  
Vol 28 (1) ◽  
pp. 26-50 ◽  
Author(s):  
Abdulaziz Alzeban
Keyword(s):  
Financial Reporting ◽  
Audit Committee ◽  
Negative Impact ◽  
Empirical Work ◽  
Internal Audit ◽  
Reporting Quality ◽  
Positive Influence ◽  
Financial Reporting Quality ◽  
Annual Reports ◽  
Content Type

Purpose This study aims to explore the influence of internal audit (IA) reporting lines and the implementation of IA recommendations (IMPLEMENT) on financial reporting quality (FRQ). Design/methodology/approach Data were obtained from the annual reports of 201 UK listed companies, and also from survey questionnaires completed by the chief audit executives working within those companies. Two measures are used as proxies of FRQ: abnormal accruals and accrual quality. Findings Findings indicate that when IA reports directly to the audit committee (AC), there is a significant positive influence upon FRQ. Conversely, when IA reports to the chief executive officer (CEO) or chief financial officer (CFO), there is a negative impact on FRQ. It is further shown by the results that lower income-increasing accruals are evident when there is greater IMPLEMENT, thereby showing an accompanying positive influence on FRQ. Moreover, the results indicate that greater adoption of such recommendations is also associated with internal reporting lines, i.e. when IA reports directly to the AC, FRQ results improved. Originality/value These findings contribute to the literature in the field of IA reporting, by introducing new insights regarding reporting lines and IMPLEMENT, and the influence of these on FRQ, and by establishing those insights through empirical work undertaken in the UK where little research on this issue has been reported.

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.

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 The Qualitative Characteristics of Accounting Information, Earnings Quality, and Islamic Banking Performance: Evidence from the Gulf Banking Sector

2020 ◽  
Vol 8 (2) ◽  
pp. 30
Author(s):  
Ibrahim Elsiddig Ahmed
Keyword(s):  
Financial Reporting ◽  
Positive Relationship ◽  
Banking Sector ◽  
Earnings Quality ◽  
Negative Relationship ◽  
Reporting Quality ◽  
Financial Reporting Quality ◽  
Annual Reports ◽  
Significant Positive Relationship ◽  
Qualitative Characteristics

The study aims to operationalize financial reporting quality in terms of the qualitative characteristics (QCs) as stated by the Accounting and Auditing Organization of Islamic Financial Institutions (AAOIFI) standards, as well as to investigate their association with earnings quality (EQ) and banking performance. The study uses secondary data extracted from DataStream to operationalize and measure the financial reporting quality in the annual reports of 25 out of the 27 Islamic banks in the Gulf Council Countries (GCC) for a 5-year period (2014–2018), meaning 125 annual reports were used. The study applies a manual content analysis to the annual reports to score all the items of QCs and operationalizes 25 measurement items that represent the six QCs. All items use 5-point Likert-type scales to compute the sub-score and the overall index through the Neural Network System. The findings of the model paths show a significant positive relationship between EQ and most of the QCs. The first hypothesis is partially accepted as there is a positive relationship between EQ and relevancy, reliability, prudence and general quality; however, there is no significant relationship between EQ and understandability and there is a significant negative relationship between EQ and comparability. Moreover, the study finds a significant positive relationship between EQ and ROA on one hand and EQ and ROE on the other hand (p-value = 0.00), meaning the second hypothesis is supported.

An examination of the impact of compliance with internal audit standards on financial reporting quality

2019 ◽  
Vol 17 (3) ◽  
pp. 498-518 ◽  
Author(s):  
Abdulaziz Alzeban
Keyword(s):  
Financial Reporting ◽  
Middle Eastern ◽  
Internal Audit ◽  
Reporting Quality ◽  
International Standards ◽  
Financial Reporting Quality ◽  
Annual Reports ◽  
Content Type ◽  
Internal Auditors ◽  
The Impact

Purpose The purpose of this study is to explore the impact of internal audit (IA) compliance with the International Standards for the Professional Practice of Internal Auditing (ISPPIA) on financial reporting quality (FRQ). Design/methodology/approach Data were gathered from 142 chief audit executive from Saudi listed companies, and also from the annual reports of the participating companies. Two proxies are used to measure FRQ, namely, discretionary accruals and accruals quality. Findings The findings reveal that companies demonstrating higher IA compliance with standards have better FRQ. They also indicate that the interaction between IA competency and its compliance with standards has an impact on FRQ. Further, the findings provide evidence that FRQ is higher in companies where IA departments have formal documentation, that is, entirely consistent with the ISPPIA. These results retain their robustness after further analysis. Originality/value In offering these findings, the paper contributes to the existing IA literature by introducing evidence from a Middle Eastern context, namely, Saudi Arabia, of the link between IA compliance with the ISPPIA and FRQ. It confirms the role of IA in FRQ, and hence, as an element of corporate governance, information, which is valuable for both the institute of internal auditors and companies.

scholarly journals GLOBALISATION OF FINANCIAL REPORTING STANDARD OF LISTED COMPANIES IN ASEAN TWO: MALAYSIA AND SINGAPORE

2017 ◽  
Vol 16 (1) ◽  
Author(s):  
Daw Tin Hla ◽  
Abu Hassan bin Md Isa
Keyword(s):  
Corporate Governance ◽  
Financial Reporting ◽  
Stock Exchange ◽  
Reporting Quality ◽  
Financial Reporting Quality ◽  
Annual Reports ◽  
International Financial Reporting Standards ◽  
Reporting Standards ◽  
Reporting Standard ◽  
Financial Reporting Standards

Malaysia and Singapore are the top two successful economies in the ASEAN region. They are converging their national accounting standards with the International Financial Reporting Standards (IFRSs) in an attempt to be more globalised. The globalisation of financial reporting standard is not just accounting focus but also for enhancing the quality and transparency of financial reporting of the firms in these countries. Investors and the other stakeholders rely on financial information reported by the firms on their websites to enable the information to access globally. This study focuses on the globalisation of financial reporting standards, corporate governance and transparency practice by the firms listed on Bursa Malaysia and Singapore. It is to analyse the level of financial reporting quality of the firms in compliance with the International Financial Reporting Standards (IFRS) in their annual reports by using disclosure analysis. Additionally, it determines the association between the financial reporting quality with IFRS compliance, and corporate governance and transparency practice of the firms listed on the main markets of Bursa Malaysia and main board of Singapore Stock Exchange (SGX), using multiple regression analysis. The finding of this study highlights the association of higher level of financial reporting quality with IFRS compliance of the firms, and their good corporate governance and transparency practice are positively associated in these two countries. This study also provides some opportunities to achieve sustainable convergence with the International Financial Reporting Standards of the firms by improving corporate governance and transparency in ASEAN countries.Keywords: International Financial Reporting Standards; Corporate Governance; Transparency and Disclosure Practice; Malaysia and Singapore.

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