The Effect of Financial Reporting Quality on Financing and Investment

2016 ◽  
Vol 4 (3) ◽  
pp. 113-120
Author(s):  
Windy Angela ◽  
Rilya Aryancana
Keyword(s):  
Financial Reporting ◽  
Quantitative Research ◽  
Reporting Quality ◽  
The United States ◽  
Financial Reporting Quality ◽  
Library Research ◽  
Domestic Capital ◽  
Financing Frictions ◽  
Negative Effect ◽  
Financing And Investment

Objective - This study examines the effect of financial reporting quality on financing and investment of 15 large Indonesian companies that may still be under-investing in relation to its regional peers. Methodology/Technique - This research uses the quantitative research technique which involves field search, library research and statistical methods. Findings - The results suggest that (1) financial reporting quality has negative effect on financing (2) financial reporting quality has positive effect on investment among companies with higher likelihood of over-investing and negative effect on investment among those with higher likelihood of under-investing. Novelty - This research is complementary to previous researchers because they use financial reporting data of companies located in the United States whose domestic capital markets remain the largest and deepest globally. This might affect the degree of information asymmetry and financing frictions that companies face and hence, lead to an upward bias of the effect. Meanwhile, this research is conducted in Indonesia whose non-financial companies obtain nearly 50% of their financing from abroad via loans, bonds, and other credit. Type of Paper - Conceptual Type of Paper - Financial reporting quality; Financing; investment; Likelihood of over-investing; Likelihood of under-investing.

scholarly journals The Effect of Financial Reporting Quality on Financing and Investment

ETIKONOMI ◽  
2017 ◽  
Vol 16 (1) ◽  
pp. 81-92
Author(s):  
Windy Angela ◽  
Rilya Aryancana
Keyword(s):  
Financial Reporting ◽  
Reporting Quality ◽  
Paper Analysis ◽  
Financial Reporting Quality ◽  
Corporate Credit ◽  
Standard And Poor's ◽  
Negative Effect ◽  
Asean Economic Community ◽  
Financing And Investment ◽  
Positive Effect

This paper analysis the effect of reporting quality on financing and investment. It is important for us to understand the relation among them in order to prepare Indonesian companies for ASEAN Economic Community in 2015. The study examines the effect of financial reporting quality on financing and investment of 15 Indonesian companies with large market capitalization based on the Standard and Poor’s Rating Services in its first survey of the major corporate credit trends in the Association of Southeast Asian Nations (ASEAN). Those companies may still be under-investing in relation to its regional peers. The results suggest that (1) financial reporting quality has negative effect on financing. (2) financial reporting quality has positive effect on investment among companies with higher likelihood of over-investing and negative effect on investment among those with higher likelihood of under-investing.DOI: 10.15408/etk.v16i1.4600 

Executive Stock Ownership Guidelines and Debtholder Wealth

2018 ◽  
Vol 94 (2) ◽  
pp. 267-295 ◽  
Author(s):  
Jun-Koo Kang ◽  
Limin Xu
Keyword(s):  
Financial Reporting ◽  
Stock Prices ◽  
Reporting Quality ◽  
Financial Reporting Quality ◽  
Stock Ownership ◽  
Yield Spreads ◽  
Bond Yield ◽  
Negative Effect ◽  
Loan Spreads ◽  
Instrumental Variables Approach

ABSTRACT We examine how the adoption of executive stock ownership guidelines affects debtholder wealth. We find that guideline adoption is associated with lower loan spreads, fewer collateral requirements, and fewer other restrictive covenants. The results are robust to using an instrumental variables approach. We further find that guideline adoption has a negative effect on bond yield spreads and that after the adoption, firms' risk-taking incentives are lower. These results suggest that guideline adoption benefits debtholders by lowering agency costs of debt. However, we also find that adoption of ownership guidelines is associated with a significant increase in stock prices, and that firms are more likely to increase financial reporting quality in the post-adoption period, indicating that guideline adoption incentivizes managers to improve firm fundamentals, benefiting both shareholders and debtholders. JEL Classifications: G21; G32; M12; M41.

Do Director Networks Matter for Financial Reporting Quality? Evidence from Audit Committee Connectedness and Restatements

2020 ◽  
Vol 66 (8) ◽  
pp. 3361-3388 ◽  
Author(s):  
Thomas C. Omer ◽  
Marjorie K. Shelley ◽  
Frances M. Tice
Keyword(s):  
Financial Reporting ◽  
Audit Committee ◽  
Operating Performance ◽  
Reporting Quality ◽  
Financial Statements ◽  
Audit Committees ◽  
Financial Reporting Quality ◽  
Reporting Practices ◽  
Multiple Dimensions ◽  
Negative Effect

This study examines the effect of audit committee connectedness through director networks on financial reporting quality, specifically the misstatement of annual financial statements. Using network analysis, we examine multiple dimensions of connectedness and find that after controlling for operating performance and corporate governance characteristics, firms with well-connected audit committees are less likely to misstate annual financial statements. In addition, our study demonstrates that audit committee connectedness through director networks moderates the negative effect of board interlocks to misstating firms on financial reporting quality. We conduct several tests to address identification concerns and find similar results. Our findings suggest that firms with better-connected audit committees are less likely to adopt reporting practices that reduce financial reporting quality. This paper was accepted by Suraj Srinivasan, accounting.

scholarly journals Financial reporting quality in enterprises in Vietnam

2019 ◽  
Vol 3 (2) ◽  
pp. 143-152
Author(s):  
Pham Quoc Thuan
Keyword(s):  
Financial Reporting ◽  
Internal Control ◽  
Quantitative Research ◽  
Reporting Quality ◽  
Indirect Measurement ◽  
Financial Reporting Quality ◽  
Chief Financial Officers ◽  
Measurement Scale ◽  
Technology Managers ◽  
Qualitative Characteristics

Financial reporting quality is one the most interesting topic, drawing many researchers and scientists' attentions in the field of a ccounting. Previous studies have shown that the measurement of financial reporting quality is developed in two main d irections: direct measurement (by operationalizing the qualitative characteristics) and indirect measurement (examines the level of earnings management; the specific elements in the annual report in depth,… as a proxy for financial reporting quality). This research aims to build, complete the measurement scale and assess the quality of financial reporting based on qualitative characteristics defined by FASB & IASB 2010. Qualitative research is used to build and complete the measurement scale of financial reporting through case studies using in-depth interviews and focus groups with respondents being specialists and experts in accounting field ( including. university lecturers, chief accountants, heads of internal control, Information technology managers and chief financial officers in enterprises in Vietnam). Quantitative research is used for measuring the financial reporting quality through survey on enterprises in Vietnam. The findings show that financial reporting quality is considered acceptable with average point being 3.7102/5. Among 3 qualitative characteristics of financial reporting quality, the enhancing characteristics are highly evaluated (4.2065/5) while the fundamental characteristics (relevance and faithful presentation) are considered as moderate (3.7032/5 and 3.5590/5).  

The Impact of Going Concern on Financial Reporting Quality: Evidence from Vietnam

2018 ◽  
Vol 34 (3) ◽  
Author(s):  
Phung Anh Thu ◽  
Nguyen Vinh Khuong
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Financial Distress ◽  
Reporting Quality ◽  
Financial Reporting Quality ◽  
Viet Nam ◽  
Listed Firms ◽  
Going Concern ◽  
Debt Covenant

The investigation was conducted to contribute empirical evidence of the association between going concern and financial reporting quality of listed firms on the Vietnam stock market. Based on data from 279 companies listed on the HNX and HOSE exchanges in Vietnam for the period 2009-2015, the quantitative research. Results found that the relationship between the going concern and financial reporting quality of listed firms. Research results are significant for investors, regulators to the transparency of financial reporting information. Keywords Going concern, financial reporting quality, listed firms References Agrawal, K., & Chatterjee, C. (2015). Earnings management and financial distress: Evidence from India. Global Business Review, 16(5_suppl), 140S-154S.Bergstresser, D., & Philippon, T. (2006). CEO incentives and earnings management. Journal of Financial Economics, 80(3), 511–529.Burgstahler, D., & Dichev, I. (1997). Earnings management to avoid earnings decreases and losses. Journal of Accounting and Economics, 24(1), 99–126.Charitou, A., Lambertides, N., & Trigeorgis, L. (2007a). Earnings behaviour of financially distressed firms: The role of institutional ownership. Abacus, 43(3), 271–296.Chen, Y., Chen, C., & Huang, S. (2010). An appraisal of financially distressed companies’ earnings management: Evidence from listed companies in China. Pacific Accounting Review, 22(1), 22–41Dechow, P., & Dichev, I. (2002). The Quality of Accruals and Earnings: The Role of Accrual Estimation Errors. The Accounting Review, 77, 35-59.DeFond, M., & Jiambalvo, J. (1994). Debt covenant violation and manipulation of accruals. Journal of Accounting and Economics, 17(1), 145–176.DeFond, M.L., & Park, C.W. (1997). Smoothing income in anticipation of future earnings. Journal of Accounting and Economics, 23(2), 115–139.Dichev, I., & Skinner, D. (2004). Large sample evidence on the debt covenant hypothesis. Journal of Accounting Research, 40(4), 1091–1123.Đinh Thị Thu T., Nguyễn Vĩnh K. (2016). Tác động của hành vi điều chỉnh thu nhập đến khả năng hoạt động liên tục trong kế toán: Nghiên cứu thực nghiệm cho các doanh nghiệp niêm yết tại Việt Nam, Tạp chí phát triển khoa học và công nghệ, Quí 3, tr.96-108.Đỗ Thị Vân Trang (2015). Các mô hình đánh giá chất lượng báo cáo tài chính, Tạp chí chứng khoán Việt Nam, 200, tr 18-21.Habib, A., Uddin Bhuiyan, B., & Islam, A. (2013). Financial distress, earnings management and market pricing of accruals during the global financial crisis. Managerial Finance, 39(2), 155-180.Jaggi, B., & Lee, P. (2002). Earnings management response to debt covenant violations and debt restructuring. Journal of Accounting, Auditing & Finance, 17(4), 295–324.Kasznik, R., (1999). On the association between voluntary disclosure and earnings management. Journal of accounting research, 37(1), pp.57-81.Lu, J. (1999). An empirical study of earnings management by loss-making listed Chinese companies. KuaijiYanjiu (Accounting Research), (9), 25–35.McNichols, M.F. and Stubben, S.R., (2008). Does earnings management affect firms’ investment decisions?. The accounting review, 83(6), pp.1571-1603.Selahudin, N.F., Zakaria, N.B., & Sanusi, Z.M. (2014). Remodelling the earnings management with the appear- ance of leverage, financial distress and free cash flow: Malaysia and Thailand evidences. Journal of Applied Sciences, 14(21), 2644–2661.Skinner, D.J., & Sloan, R. (2002). Earnings surprises, growth expectations, and stock returns or don’t let an earnings torpedo sink your portfolio. Review of Accounting Studies, 7(2/3), 289–312.Sweeney, A.P., (1994). Debt-covenant violations and managers' accounting responses. Journal of Accounting & Economics, 17(3): 281-308.Trần Thị Thùy Linh, Mai Hoàng Hạnh (2015). Chất lượng báo cáo tài chính và kỳ hạn nợ ảnh hưởng đến hiệu quả hoạt động của doanh nghiệp Việt Nam, Tạp chí phát triển kinh tế, 10, tr.27-50.Trương Thị Thùy Dương (2017). Nâng cao chất lượng báo cáo tài chính công ty đại chúng, Tạp chí tài chính, 1(3), tr.55-56.Uwuigbe, Ranti, Bernard, (2015). Assessment of the effects of firm’s characteristics on earnings management of listed firms in Nigeria, Asian Economic and Financial Review,5(2):218-228.

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