Do the results of information transparency reflect firms’ accounting quality?

Abstract

This work mainly uses the information in financial statements from Taiwanese listed firms from the start of 2006 to the end of 2009 to build a proxy of accounting quality. Discriminant and correlation analyses are used to discuss whether the information transparency results announced by the Information Transparency and Disclosure Rankings System maintained by the Securities and Futures Institute properly reflect the quality of financial reporting. The empirical results indicate that information transparency and accounting quality are not highly related, although they are more related in the electronics industry than in other industries. The empirical findings suggest that it may be important to include more accounting-quality related items into the proxies of financial reporting when building an information evaluation system. Key words: Accounting quality, feedback, information transparency, neutrality, predictability, representational faithfulness, timeliness.