scholarly journals Contracting debt and the quality of financial reporting in private firms

2018 ◽  
Vol 63 (2) ◽  
pp. 37
Author(s):  
Inna Sousa Paiva
Keyword(s):  
Financial Performance ◽  
Financial Reporting ◽  
Strong Evidence ◽  
Reporting Quality ◽  
Discretionary Accruals ◽  
Financial Reporting Quality ◽  
Private Firms ◽  
Bank Debt ◽  
Using Data

<p class="Default"><span lang="EN-US">This study investigates whether the quality of firms’ financial reporting is influenced by the con­tracting of debt, using data on Portuguese private firms from 2013 to 2015. More specifically, the study uses earnings smoothing, magnitude of absolute discretionary accruals, and timeliness of disclosure as proxies for financial reporting quality. I find that private firms which contract more debt exhibit higher levels of financial reporting quality. Additionally, firms that contract larger amounts of debt and with a good financial performance tend to exhibit lower quality financial reporting. The results provide strong evidence that private firms have an interest in camouflaging their performance in the presence of higher levels of bank debt. </span></p>

scholarly journals THE INITIAL IMPLEMENTATION OF ACCRUAL BASED ACCOUNTING, THE EFFECT ON PERFORMANCE AND FINANCIAL REPORTING QUALITY AT LOCAL GOVERNMENTS IN INDONESIA

2019 ◽  
Vol 11 (1) ◽  
pp. 13
Author(s):  
Rindu Rika Gamayuni
Keyword(s):  
Financial Performance ◽  
Financial Reporting ◽  
Local Governments ◽  
Reporting Quality ◽  
Financial Reporting Quality ◽  
Fiscal Year ◽  
Accounting Standard ◽  
Government Accounting ◽  
Before And After

Abstract: In Indonesia local government, accrual based Government Accounting Standard (GAS) was started to be mandatorily applied in 2015, so this research aims to investigate to what extent the role of accrual GAS implementation toward quality of financial reporting and financial performance especially at local governments. Population of this study is Local Governments of districts/cities in Indonesia for Fiscal Year 2014 and Fiscal Year 2015, as many as 542 local governments (before and after the implementation of accrual base).  Sampling method uses probability sampling which is cluster sampling. In this case, the population is divided based on 34 province clusters, so the number of sample obtained is 242 local governments of districts/cities in Indonesia.  The hypothesis testing uses paired t test. The object of research is the financial reporting quality and financial performance. The results of this study provide empirical evidence that there is an increase in the quality of financial reporting after the application of accrual-based accounting at local governments in Indonesia, but have not proven the existence of the increased financial performance. There is no differences in financial performance before and after accrual based accounting implementation at local governments in Indonesia. This hyphothesis  was not supported due to the application of accrual basis accounting is still in the early stages of implementation (1 year) that still have constraints in limited human resources competencies, necessary adaptations or adjustments in the process of change. Local governments in Indonesia must apply accrual based accounting because it is proven that it increases financial report quality.  However, the system implementation in the beginning period found many obstacles so it needs continuous adjustment and learning in order to reach desirable goal. There is still a debate on how important is the implementation or adoption of accrual IPSAS in many countries, including Indonesia.  In Indonesia, the implementation of accrual based Government Accounting Standard (SAP/GAS) is new mandatory since 2015. The result of this research will give contribution to the theory, that there is significant influence of implementation accrual based GAS to financial reporting quality, but no significant increase in financial performance (efficiency and effectiveness) at local government.  Therefore, this result study will be used to determine related policies about the implementation of accrual based GAS. Keywords: Accrual Based Accounting, Financial Reporting Quality, Financial Performance, Government

scholarly journals Financial Reporting Quality and Online Disclosure Practices in Spanish Governmental Agencies

2021 ◽  
Vol 13 (5) ◽  
pp. 2437
Author(s):  
Javier Garcia-Lacalle ◽  
Lourdes Torres
Keyword(s):  
Public Sector ◽  
Financial Performance ◽  
Financial Reporting ◽  
Central Government ◽  
Good Governance ◽  
Reporting Quality ◽  
Financial Reporting Quality ◽  
Equation Modeling ◽  
Governing Body

Good governance in the public sector implies high accountability levels. Accountability is a multidimensional concept that includes the quantity and reliability of disclosures as well as rendering accounts to the citizenry. Nowadays, good governance, accountability, and financial performance are key for the long-term sustainability of autonomous public sector organizations. The objective of this paper is to study how key governance features relate to the quantity and quality of the information disclosed. In particular, how the governing body, financial performance and organizational features relate to online transparency and financial reporting quality, as well as how these two accountability dimensions are related. To fulfill this objective, we have used the Structural Equation Modeling, Partial Least Squares (PLS-SEM) approach. The focus of our analyses is on Spanish central government agencies. The size of, and a greater presence of independent members in, the governing body are explanatory factors behind the quality of the financial reports. Our findings also show that the quality of the financial information is also affected by the pressure that Eurostat requirements -deficit limits- puts on public sector entities, which leads to the use of smoothing practices. Online disclosure practices are not explained by the features of the governing body, but by the size of the agencies and their financial results. The better the financial reporting quality, the higher the online disclosure levels.

scholarly journals Corporate Governance and Financial Reporting Quality in Selected Nigerian Company

2014 ◽  
Vol 2 (3) ◽  
pp. 7-16
Author(s):  
Onuorah Anastasia Chi-Chi (PhD) ◽  
Imene Oghenefegha Friday
Keyword(s):  
Corporate Governance ◽  
Financial Reporting ◽  
Audit Committee ◽  
Audit Quality ◽  
Reporting Quality ◽  
Discretionary Accruals ◽  
Financial Reporting Quality ◽  
Board Structure ◽  
Quality Audit

This paper evaluated the level of performance of some selected companies ranging from commodities, brewery, banking, oil and gas and beverages in terms of corporate governance measure indictors on the firm quality of financial reporting in Nigeria. The data were collected from 2006 to 2015. Econometric analysis were conducted and the result suggests that the correlation among corporate governance indicators of board structure (size-BRDSZ and independence-BRDID), audit quality (audit committee size (ADCMZ), the quality of external audit (EADTQ) as measured by the presence of an auditor among the big-4), board experience (i.e. experience-BRDEX) and financial reporting quality is 93.47%. The independent variables can explain the variation in the FRQDA by 54.29%. There is overall significance among the parameters measuring financial reporting quality as discretionary accruals of firm (FRQDA). Board structure (size-BRDSZ), board experience (experience-BRDEX) and the quality of external audit (EADTQ) have positive impact on the financial reporting quality measured by the discretionary accruals of firm (FRQDA) by 16.01, 0.05 and 2.75. However, independent directors on the board of firm (independence-BRDID) and audit quality (audit committee size (ADCMZ) negatively affect financial reporting quality measured by the discretionary accruals of firm (FRQDA) as much as 0.99 and 20.01. Guarantee Trust Bank Plc. among the five selected companies of study in Nigeria has better performance of financial reporting based on board structure (size-BRDSZ) and audit committee size (ADCMZ). This revealed that there is short run relationship among Audit quality (audit committee size (ADCMZ), and the quality of external audit (EADTQ) as measured by the presence of an auditor among the big-4) and board experience (i.e. experience-BRDEX) have not granger cause FRQDA. It further recommended that greater focus on corporate governance indicators so as to bring about global standard financial reporting in the Nigerian emerging market for investment opportunity.

scholarly journals CEO INVOLVEMENT IN SELECTING CAE, INTERNAL AUDIT COMPETENCY AND INDEPENDENCE, AND FINANCIAL REPORTING QUALITY

2018 ◽  
Vol 19 (3) ◽  
pp. 456-473 ◽  
Author(s):  
Abdulaziz Alzeban
Keyword(s):  
Financial Reporting ◽  
Stock Exchange ◽  
Internal Audit ◽  
Reporting Quality ◽  
Chief Executive ◽  
Discretionary Accruals ◽  
Financial Reporting Quality ◽  
Annual Reports ◽  
Internal Audit Function

The purpose of this study is to explore the argument that Chief Executive Officer (CEO) involvement in the appointment of the Chief Auditing Executive (CAE) is detrimental to efforts to achieve good financial reporting quality (FRQ). The study is original in that to date, this precise link has not been investigated. Data are obtained via survey and annual reports relating to 307 UK companies listed on the London Stock Exchange, and the working capital and discretionary accruals are used as proxies for financial reporting quality. The findings support the contention that the benefits to FRQ of an independent and competent internal audit function are not realized when there is CEO involvement in the appointment of the CAE, since management is able to override IA controls. Indeed, high FRQ is only evident when the CEO is not involved in the appointment. The results are found to be robust after using two different methods of estimation, and carry the implication regulators concerned with FRQ and quality of internal audit function that the CEO should not be party to the appointment of the CAE since this will depress FRQ.

Discretionary Accruals in Italian Private Firms and Non-Linear Bank Loan Granting

2017 ◽  
pp. 83-99
Author(s):  
Elisabetta Mafrolla ◽  
Viola Nobili
Keyword(s):  
Financial Reporting ◽  
Banking System ◽  
Regulatory System ◽  
Discretionary Accruals ◽  
Bank Loans ◽  
Bank Loan ◽  
Banking Union ◽  
Private Firms ◽  
European Banking Union

This paper investigates whether and at what extent private firms reduce the quality of their accruals in order to signal a better portrait to the bank and obtain new or larger bank loans. We measure earnings discretionary accruals of a sample of Italian private firms, testing whether new and larger bank loans are associated with a higher (lower) quality of earnings in borrowers' financial reporting. We study bank loan levels and changes and how they impact discretionary accruals and found that, surprisingly, private firms' discretionary accruals are systematically positively affected by an increase in bank loans, although they are negatively affected by the credit worthiness rating assigned to the borrowers. We find that the monitoring role of the banking system with regard to the adoption of discretionary accruals is effective only when the loan is very large. This paper may have implications for policy-makers as it contributes to the understanding of the shortcomings of the banking regulatory system. This is an extremely relevant issue since the excessive amount of non-performing loans held by Italian banks recently threatened the stability of the European Banking Union as a whole.

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.

scholarly journals The effect of governance system and degree of convergence to IFRs on the quality of financial reporting: Evidence from Asia

2015 ◽  
Vol 12 (4) ◽  
pp. 409-423
Author(s):  
Ratna Wardhani ◽  
Sidharta Utama ◽  
Hilda Rossieta
Keyword(s):  
Corporate Governance ◽  
Financial Reporting ◽  
Reporting Quality ◽  
International Standards ◽  
Financial Reporting Quality ◽  
Governance System ◽  
Governance Practice ◽  
Corporate Governance Practice ◽  
Degree Of Convergence

This research investigates the effect of governance system and degree of convergence to IFRS on financial reporting quality. With sample of Asian countries, this study concludes that country level and firm level governance systems, both at, and the degree of convergence have positive influence on financial reporting quality.The effect of degree of convergence of local GAAP to IFRS and corporate governance practice to financial reporting quality will be stronger for companies in countries with weak investor protection. Also, we find that in company with weak corporate governance practice, the adoption of international standards will increase the quality of financial reporting.The results indicate that the adoption of international accounting standard become more important in the countries and companies with weak governance system.

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