Quality Of Financial Disclosure Research Articles

Corporate Governance and Board Attributes: A Bibliometric View

Numerous high-profile corporate scandals in the 1990s—involving companies like Tyco, Enron, Arthur Anderson, Xerox, AIG Insurance, Lehman Brothers, etc.—elucidated the government's inadequacy in overseeing shareholder interests. These scandals affected markets worldwide. In order to address corporate misconduct and keep investor trust and strong performance, it is claimed that CG must be improved to a "sound" quality. Some well-known examples include the US Sarbanes-Oxley Act, the recommendations for corporations made by the EU Cadbury Committee, and the corporate governance standards set out by the OECD. First and foremost, the Cadbury Committee (1992) supported exposure as "a medium for responsibility," highlighting the need to increase reporting requirements to prevent regulatory complications. " But instead of trying to pin it down, they summed it up as "the ability for investors and others to assess companies' performance and governance practice and respond in an informed way"—commercial gest. "Guidance on Good Practices in Corporate Governance Disclosure" (OGCD, 2006) specifies that any major issues with the company's CG should be disclosed promptly. The "substance over form" principle dictates that the exposure be brief, precise, and easy to understand. As a result of these "new" developments, businesses are being pressured to follow "sharpe practice" requirements, claims Dragmore (2009). Reporting on corporate governance and social responsibility, community across time, adding an operations report, balancing financial and non-financial information, and story reporting are all part of these rules. The quality of financial and non-financial information disclosures is influenced by "the robustness" of the reporting morals, which FASB (2001) states is the basis for disclosures of both types of information. In addition, transparency reveals the company's performance, growth strategies, client demand, and issues (Chahine and Filatotchev, 2008). Shareholders are able to evaluate the operation's effectiveness as a result of information disclosure by observing how efficiently the company's funds are being utilised to benefit the star. It is possible to examine "exposure from two perspectives: marketable exposure and financial account exposure," as Solomon (2004) brought out. Information and its disclosure are the areas where account requirements and company law intersect, according to Parker (2007). One universal element of account regulations is the importance of providing stoners with sufficient and timely information so that they can engage in the request informed.

Effect of industry-specialist auditors, auditor's tenure, and auditor's size on the quality of disclosure in the UAE Stock Exchange

Having access to real-world information and accurate data is a key factor in improving auditor performance, which in turn impacts business performance and decision-making. Consequently, this research aims to determine how financial institutions' levels of experience impact the accuracy of the information they disclose. The present statistical population consists of all 127 businesses listed on the United Arab Emirates Stock Exchange. This type of research is categorized as applied studies in relation to the research methods used in the UAE stock market. Using a systematic deletion procedure, 46 companies were chosen based on the study's inclusion criteria. The findings revealed that in the UAE, the quality of financial information disclosure for companies listed on the UAE stock exchange is significantly affected by the auditor's decision-making experience, the duration of their job, and the size of the auditor.

The Quality of Financial Information Disclosures and its Contribution to Financial Stability of Commercial Banks in Kenya

The Quality of Financial Information Disclosures and its Contribution to Financial Stability of Commercial Banks in Kenya

CEO-executive connections and auditor resignations

ABSTRACT This article examines the impact of connections between the Chief Executive Officer (CEO) and other executives on auditor resignations. Prior literature documents both the positive and negative effects of CEO-executive connections on financial disclosure quality. However, there remains a lack of understanding regarding whether auditors perceive CEO-executive connections as a factor that potentially increases or decreases audit risk. To address the gap, this study investigates the association between CEO-executive connections and the likelihood of auditor resignations. The results based on 19,452 firm-year observations of S&P 1500 firms from 2004 to 2015 show that CEO-executive connections, especially visible connections, are positively associated with auditor resignations. Moreover, the association is more pronounced for firms with poor oversight over the financial reporting process and management. This suggests that CEO-executive connections are an audit risk factor that heightens the inherent and control risks of the firm, which can be mitigated through effective oversight mechanisms. This study contributes to the auditing literature by investigating an unexplored determinant of audit risk, that is, CEO-executive connections, and highlights the need to evaluate the management-related factors that could potentially heighten risks for auditors and regulators.

Accounting Information Consistency and Audit Fees: Evidence from China

This article uses the financial data of China’s A-share listed companies from 2007 to 2020 and examines the impact of accounting information consistency on audit fees. The study finds that higher consistency is significantly associated with a firm’s lower audit fees after controlling for other factors. After the robustness test, the conclusion remains unchanged. The mechanism test finds that higher consistency reduces audit risks and thus reduces the company’s audit fees. Further research finds that the reducing effect of consistency on audit fees is significantly more apparent in companies with higher financial leverage. Overall, this article expands the research on the influencing factors of audit fees from the consistency perspective. The research conclusions have reference value for information users to use accounting information to supervise governance, improve the quality of financial statement disclosure, and reduce the company’s audit fees.

Does XBRL Tagging Indicate Disclosure Quality? The Relationship Between XBRL Standard and Extension Tags and Stock Return Synchronicity

ABSTRACT We propose new measures of financial disclosure quality based on XBRL standard and extension tag counts. XBRL is designed to allow users to analyze more financial statement detail, thereby increasing reporting transparency. Thus, firms that use more XBRL standard tags should produce more detailed and comparable financial reports. To test this assertion, we examine the association between XBRL tag counts and stock return synchronicity, which measures the market’s reaction to the quality of firms’ disclosures. We find that firms that use more standard taxonomy tags in their 10-K reports have higher stock return synchronicity after the 10-K filing. However, we find that stock return synchronicity decreases as XBRL extension tag counts increase, suggesting that the use of extension tags reduces disclosure quality. Our findings contribute to the growing body of research on XBRL disclosure. Data Availability: Data are available from the public sources cited in the text.

Do Gender-Diverse Boards Enhance the Linguistic Features of Corporate Financial Reporting?

SYNOPSIS Textual features, such as readability and disclosure tone, of mandatory financial reports have significant economic consequences. Managers and directors’ demographic attributes can also lead to different reporting styles. This study examines how gender-diverse boards influence the readability and tone of corporate financial disclosures under the framework of upper echelons theory. Using a sample of 3,085 U.S. firm-year observations from 2007 to 2016, we find that gender diversity in the board and audit committee enhances the readability of narrative disclosures and is associated with a less optimistic, litigious, and ambiguous tone in annual reports. This study highlights the contribution of female directors to the quality and transparency of financial disclosures and supports recent regulatory initiatives aimed at enhancing female representation on corporate boards.

Quality of financial disclosures related to environmental, social, and governance matters, and firm characteristics and firm value: A comparative study across four ASEAN countries

This research aims to understand how a company’s characteristics influence its disclosure of sustainability-related financial information and how such disclosure affects the company’s value. The study uses three company characteristics as variables: size, profitability, and leverage. The two dependent variables are the quality of sustainability reporting and company value. The research uses a quantitative explanatory method. The study uses sustainability disclosure data, based on the IFRS S1 framework, from 162 companies listed on the sustainability-based stock indexes in Indonesia, Malaysia, Singapore, and Thailand in 2021. The data obtained were analyzed using descriptive statistical analysis and path analysis. The study results show that only company size influences the quality of sustainability item disclosure, while profitability and leverage have no effect. The quality of sustainability item disclosure has a positive effect on company value. This study shows that sustainability disclosure in financial reports can increase a company’s value in the eyes of investors, but significant efforts are still needed to improve the quality of such disclosure. The findings indicate that the size of a firm has a significant impact on the expenses associated with publishing sustainability information. However, the company's performance does not have a similar relationship.

Top Management Team Functional Diversity and Management Forecast Accuracy

SYNOPSISIn this study, I examine whether top management team (TMT) between-member and within-member functional diversity affect management earnings forecast accuracy. Between-member functional diversity refers to the heterogeneity of functional experts on a TMT and within-member functional diversity refers to the aggregate functional breadth of TMT members. I find that both types of functional diversity are positively associated with management forecast accuracy. Further cross-sectional analyses show that these positive associations are significant only when firms face greater information uncertainty, when TMTs are more decentralized, and when TMT members have longer joint team tenure. These findings are consistent with the information-processing perspective that TMT functional diversity can facilitate information processing and sharing and thus improve management forecast accuracy. This study contributes to the literature by shedding light on how TMT members with various functional backgrounds work together in shaping financial disclosure quality.Data Availability:Data are available from the public sources cited in the text.

Quality of Financial Information Disclosure and Efficiency of Resource Allocation Under Dual-Track System: Empirical Evidence of Registration System Reform in China

ABSTRACT This study examined the listed companies in China’s National Equities Exchange and Quotations (NEEQ) from 2014 to 2021 to investigate the influence of the financial disclosure quality of IPO companies on the speed of passing in different systems of registration and approval from the perspective of resource allocation efficiency. In the trial registration system, high-quality financial disclosure was found to significantly improve IPO enterprises’ speed of passing, while venture capital and its characteristic variables enhanced the relationship between the financial disclosure quality and speed of passing; Distinguishing between regional marketability and firm characteristics attributes reveals that the contribution of venture capital to the relationship between financial disclosure quality and speed of passing is more pronounced in the sample of firms in low marketability regions, high technology, and smaller size. In addition, further research shows that the enterprises with high financial disclosure quality in the registration system sample have higher long-term excess returns after listing. Finally, the conclusion is still robust after using the generalized tendency matching score (GPSM) and instrumental variable method (IV) to eliminate endogenous interference. The conclusion provides empirical support and a theoretical basis for reforming the registration and issuance system in emerging market countries.

Creative Accounting: An Overview of its Practices Where are We Heading Now?

Accounting plays a significant role in the contractual relations that form the modern corporation, presumably to mitigate agency costs. However, it is argued that preparers are likely to have incentives to convey self-serving information is also likely to impose costs on financial statement users. This practice known as creative accounting which referring to the process of taking deliberate steps within the constraints of GAAP to bring about desired level of reported earnings. Even though not all accounting choices involve creative accounting or earnings management, and the term earnings management extends beyond accounting choice, the implications of accounting choice to achieve managers’ personal goals are consistent with the notion of earnings management. Accounting is a medium for managers to disseminate privately held information through accounting information releases, and the specific accounting method choice can play a key role in that communication process. In addition to that, regulation of accounting affects the quality and quantity of financial disclosures, and thus affecting the quality of decision making of the users. This paper critically discusses the common motivation, techniques, the implications, potential mitigation mechanisms as well as reviews some of the most controversial accounting scandals in Malaysia and worldwide. We conclude that earnings management are still a very common practice despite the current development in various mitigating mechanisms.

An Empirical Investigation of the Effect of CFO Power on Disclosure Quality

We examine the association between chief financial officer (CFO) power and disclosure quality, measured using financial statement disaggregation disclosure and analyst forecast disclosure. Empirically, we validate that CFO power, measured by multiple dimensions, is positively associated with firms’ disclosure quality. We also find that this positive association between CFO power and disclosure quality is stronger when firms exhibit higher governance monitoring and accounting quality. Further analysis shows that our main results hold across multiple disclosure quality tests. Our findings are robust to addressing endogeneity issues using two‐stage least squares, Heckman selection bias, and propensity score matching analyses. The results highlight the importance of CFO power for the accounting reporting process and decision‐making.

Disclosing for Promotion or Perquisites: Local Government Financial Disclosure Strategy

ABSTRACT How to stimulate local officials to improve the financial disclosure quality is a fundamental question of the public accountability theory. Based on the manually collected data on disclosure quality of provincial final accounts report in China, this study examines the influence of provincial leaders’ utility goals on final accounts disclosure strategies. We find that provincial leaders voluntarily disclose higher-quality final accounts information in the first and last years of their tenure relative to other years. Furthermore, excellent governance performance and stronger position change expectations significantly increase the improvement degree of final accounts disclosure quality in the last years of the term. We also document that officials’ voluntary improvement in the final accounts disclosure quality directly leads to an increase in public satisfaction and trust in the government. Moreover, the voluntary improvement in the final accounts disclosure quality significantly strengthens the positive relationship between the governance performance and the promotion probability. Overall, based on the distinction between mandatory disclosure requirements and officials’ voluntary disclosure motives, this paper, from the perspective of officials’ utility goals, empirically investigates the micrologic behind local government’s financial disclosure decisions in authoritarian countries.

The Impact of Industry Specialist on the Relationship between Returns and Future Earnings

Abstract Financial statements reveal the company's profitability and be used as an important indicator of the risk assessment. Auditor industry specialists can provide better quality of financial reports and informative disclosures. According to Lundholm and Myers (2002), we examine whether the fact that accountants or audit firm are industry specialists will affect the relationship between returns and future earnings. Since there exists the special system of dual attestation in Taiwan, we divide the accountants into lead auditors or concurring auditors to examine the above relationship. Empirical results indicate that the higher future earnings response coefficients are associated with the companies audited by industry specialist, the higher number of industry specialists, the more industry experience of industry specialists and the greater market value of company. These findings imply that more information about future earnings are revealed. Therefore, it improves the disclosure of company's future earnings when the accountants or audit firms are industry specialists. In addition, we do not find the evidence that the future earnings response coefficients in companies audited by the lead auditor as industry specialist are higher than those in companies audited by the concurring auditor as industry specialist and in specialist accounting firms. JEL classification numbers: G34, M41, M42. Keywords: Industry specialist, Dual-signature, Future earnings response coefficient (FERC).

The impact of environmental disclosure and the quality of financial disclosure and IT adoption on firm performance: Does corporate governance ensure sustainability?

Introduction: The study’s motivation is to investigate the role of environmental and financial disclosure, IT adoption, and good governance on firms’ sustainability from 1990–2019. A sample of 75 financial institutions enlisted in Bangladesh’s capital market was considered for relevant data collection.Methodology: Secondary data sources were used for data accumulation, including annual reports of target FIs, economic review reports, and central banks publication. Several econometrical techniques have been implemented to document the empirical nexus and the elasticities of explained variables on firm performance.Findings: In terms of baseline assessment, the study revealed a positive and statistically significant association between a firm’s sustainability and target explanatory variables. Furthermore, the study extended the empirical valuation by implementing a system-GMM and documented a positive linkage between financial and environmental disclosure, IT adaptation, good governance, and the firm’s performance sustainability.Discussion: These study findings suggest that information symmetry, investor protection, and access to financial services foster and stabilize the firms’ performance. Concerning corporate governance’s mediating effect, the study established a mediating role with positive influences on financial performance augmentation. On the policy ground, the study postulated that financial policymakers should address fairness and integrity in disclosing information to the public. Enforcement has to be initiated to ensure good governance.

Assessing the quality of Internet Financial Reporting disclosure in the digital era: towards Industrial Revolution 4.0 practice

Assessing the quality of Internet Financial Reporting disclosure in the digital era: towards Industrial Revolution 4.0 practice

Conservatism and stock price informativeness

AbstractThis paper examines how conservative financial reporting influences stock price informativeness, which is defined as the extent to which the current market price reflects future earnings information. Using the accuracy of the future earnings expectations embedded in the current equity price as a measure of stock price informativeness, I find that conservative reporting is positively associated with price informativeness. The results are robust to an alternative stock price informativeness measure, namely, specific return variation or price non‐synchronicity. Furthermore, I also find that a greater positive association between conservatism and stock price informativeness is associated with (1) lower analyst coverage and decreased forecast dispersion, (2) greater bid–ask spreads and greater R&D, and (3) lower financial disclosure quality, supporting the argument that main channel by which conservatism improves stock price informativeness is its impact on the information environment. Overall, the evidence suggests that (1) conservatism improves stock price informativeness by improving the firm's information environment, and (2) the marginal benefit of improvement in stock price informativeness via conservatism is more pronounced in firms with poorer information environments. The results further confirm that conservatism substitutes for information environments in ensuring more accurate equity pricing.

Voluntary disclosure quality, institutional ownership, and stock price volatility: Evidence from a frontier market

In this paper, we examine the impact of voluntary financial disclosure quality on the stock price volatility of non-financial firms quoted on the Tunis Stock Exchange. Empirically, we first test the impact of voluntary disclosure quality on stock price volatility. Then, we examine the combined effect of voluntary disclosure quality and institutional ownership on stock price volatility. We study a sample of 411 annual reports of non financial companies listed on the Tunisian stock exchange observed over the 2010–2019 period. The results show that voluntary disclosure quality has a negative impact on stock price volatility. Our results also show that the impact of voluntary disclosure quality on stock price volatility is still significantly negative even after incorporating institutional ownership into our empirical model to test the robustness of our results. Moreover, the positive impact of institutional ownership on stock price volatility is lessened by its indirect relationship with voluntary financial disclosure quality.

To delegate or not to delegate? On the quality of voluntary corporate financial disclosure

To delegate or not to delegate? On the quality of voluntary corporate financial disclosure

The Quality of Goodwill Disclosures and Impairment in the Financial Statements of Energy, Mining, and Fuel Sector Groups during the Pandemic Period—Evidence from Poland

The COVID-19 pandemic has strongly affected the economic situation of many countries, which is worth considering not only globally but also in the context of specific industries. An asset that is particularly sensitive to negative economic changes is goodwill. The aim of this study is to assess the impact of the pandemic on the quality of financial disclosures concerning goodwill in consolidated financial statements of groups of chosen strategic sectors in Poland. We investigated the implications of the pandemic on the frequency and scale of goodwill impairment in relation to 23 companies listed on the Warsaw Stock Exchange from the Energy, Mining, and Fuel Index. We identified the research gap in this area. For the purposes of this study, two research hypotheses were formulated: (H1) during the COVID-19 pandemic, there has been a slight improvement in the quality of goodwill disclosures in the consolidated financial statements of groups in the energy, fuel, and mining sectors; (H2) The COVID-19 pandemic caused a decrease in goodwill due to impairment losses in the consolidated financial statements of groups in the energy, fuel, and mining sectors. The hypotheses were verified on the basis of the above research sample. In order to verify the first hypothesis, we tested 81 consolidated financial statements for the years 2018–2021 based on a self-developed index of the quality of disclosed information. To verify the second hypothesis, we analyzed the frequency and scale of the estimated loss of goodwill during the COVID-19 pandemic and its impact on the deterioration of the financial condition of the same research sample. The conducted research shows that the quality of disclosures regarding the goodwill in the examined sample has changed slightly. Contrary to our expectations, the pandemic did not materially reduce the value of goodwill. This means that the first hypothesis was verified positively, while the second hypothesis had to be rejected.