How Transparent Are Companies Listed On The Bucharest Stockexchange When Disclose Them Consolidated Financial Statements?

Abstract

The main objective of this paper is to examine the level of disclosure regarding the consolidated financial statements in the case of Romanian listed companies. In order to measure this, a multiple index was used that quantifies the level of dislosure a company has achieved. The main conclusion, in accordance with our hypotheses is that the disclosure index is higher in the case of first category of listed entities comparing with the second and third category. This study investigates the disclosure level of Romanian quoted companies over the years 2006- 2009 concerning the consolidated financial stetements. The sample includes all financial and nonfinancial companies whose securities were listed during this period. Data were collected from their published consolidated financial statements on CNVM site and cross-validated with information available on them website. The year 2006 was chosen as the starting point for our analyses because it marks the beginning of mandatory requirements for Romanian quoted entities to disclose the consolidated financial statements. The period analised marks the pre and post Romania accession to the European Union. The results reveal that there is a positive association between disclosures the consolidated financial statements and the of quoted entities, comparable to the conclusions reported by studies conducted on more mature markets. The dislosure level is higher for categories I quoted entities then for the category II, accordingly with the segmentation of the BSE. This paper provides several contributions to the accounting literature. First it adds to the knowledge of transition economies in general and those of Eastern and Central Europe in particular by considering a market which has not been examined before. To our knowledge, it is also the first study that analizes the consolidated financial statements disclosure for Romanian quoted entities. and the evolution of harmonization process concerning the disclosure of consolidated financial statements, and for each year the degree of material disclosure harmonization. More fundamentally, this research contributes to the literature on financial reporting by showing that the relationship between financial reporting disclosure and financial market segmentation is comparable to those observed in more favorable environments. It also clearly highlights the influence of segmentation imposed by the market on the association between the importancy given by the quoted entities to disclose accounting data and the entities value. The paper is structured as follows. Section 2 provides a short overview of the legal framework, Section 3 presents the Romanian institutional setting, in particular the BSE and its regulatory environment. Section 4 present a literature review, Section 5 describes the data and the