Abstract
The theory of purchasing power parity posits that the conversion rate between two currencies ought to be the same as the ratio of the total price levels between two currencies. Using monthly panel data for five Asian countries, from the period 1996M01-2016M08, we examine the purchasing power parity hypothesis by utilizing robust methods of panel unit root and cointegration (Pesaran and Westerlund) tests that put into consideration cross-sectional dependence. The panel unit root test results show that all the variables considered are not stationary at levels but stationary at first difference (i.e. all variables are I(1)), because of that, the cointegration test was carried out. Results showed the presence of long-run relationship among the variables implying that the purchasing power parity theory exists in the long-run. Furthermore, the long-run relationships were estimated using the dynamic ordinary least squares (DOLS), fully modified ordinary least squares (FMOLS) and the mean group (MG) estimator. Surprisingly, all these estimators gave similar results, they showed that the domestic prices cause depreciation while the foreign prices cause appreciation of the nominal exchange rates in the five Asian countries. Generally, the effect of nominal exchange rate appreciation is more than depreciation in the five Asian countries.
Highlights
The annual report is a document that provides key information for stakeholders to understand a company’s performance and position
The respondents of this study are from various career backgrounds, which include professionals, Inland Revenue Board of Malaysia (IRBM) officers, academics, management executives and students, to represent the varied users of annual reports
This study highlights three components of users’ perceptions on tax disclosure in companies’ annual report, i.e., the importance of tax disclosure, current state of tax disclosure and usefulness of more tax disclosure provided in the annual report
Summary
The annual report is a document that provides key information for stakeholders to understand a company’s performance and position. The annual report of a company presents financial performance through its financial report and disclosures of financial and tax matters section. This study finds that users perceive the tax disclosure section as an important part in the annual report and more tax information must be disclosed. They believe that tax disclosure is beneficial in facilitating decision-making and assisting tax authorities to handle tax audits. Users perceive that tax disclosure is limited, too technical to be interpreted and agree that more tax disclosure would be useful for stakeholders to comprehend companies’ tax matters. The rest of this paper is organised into several sections: Section 2 presents the literature review, Section 3 explains the methodology of this study, Section 4 discusses the results and findings and Section 5 provides the conclusion of this study
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