Reporting matters: the real effects of financial reporting on investing and financing decisions

Shakespeare, Catherine

doi:10.1080/00014788.2020.1770928

Cited by 31 publications

(12 citation statements)

References 90 publications

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“…Stakeholders are greatly concerned about the information disclosed in financial reports. The quality of the provided information is a key aspect of financial statements (Shakespeare, 2020), particularly valued by market participants (Francis et al. , 2003).…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

CSR disclosure and state ownership: implications for earnings management and market value

Garanina

2023

JAEE

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PurposeThis paper explores the relationship between earnings management and firms' value through the moderating effect of the missing elements – corporate social responsibility (CSR) disclosure and state ownership in Russian companies. The main argument of the paper is that CSR disclosure can be used as a mitigating mechanism to weaken the negative relationship between earnings manipulation and market value. Additionally test whether state ownership is an important moderating factor in this relationship are conducted as state has always played an important role in the emerging Russian market.Design/methodology/approachThe hypotheses are tested on panel data for 223 publicly listed Russian firms for the period 2012–2018. A number of robustness tests are used to check the obtained results for consistency. Following previous research GMM method is employed to address endogeneity concerns.FindingsSupported by stakeholder theory, it is observed that firms that disclosed more CSR information experience a weaker negative relationship between earnings management and market value because investors and other stakeholders positively evaluate a positive CSR image. This negative effect of earnings management on market value is even weaker for state-owned companies as market participants appreciate involvement of state-owned companies in CSR activities and place greater expectations on these firms to be responsible without clear understanding whether these actions are “window dressing” for this type of companies or not.Originality/valueThe study results provide new insights into the relation between earnings management, firm's value, CSR disclosure and state ownership in emerging-market firms. The paper highlight the importance of considering country-specific factors, such as state ownership, while analysing the market reaction on CSR disclosure and earnings management since the institutional peculiarities may help to explain differences in the obtained results.

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Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

CSR disclosure and state ownership: implications for earnings management and market value

Garanina

2023

JAEE

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“…Information transparency is understood to mean how organizations that participate in securities markets are obliged to provide adequate, truthful, and timely information regarding their operations or their target market [29,25]. The primary reason for the importance of transparency, as well as for any additional qualitative characteristics of financial information, is to provide information about business activities to investors, lenders and other existing and potential creditors, so as to give them a clear vision of how to allocate resources in the capital market [8,30]. The transparency, reliability, relevance and quality of financial information are of primary importance for capital market actors as they help investors make optimal decisions [14].…”

Section: Theoretical Backgroundmentioning

confidence: 99%

The Impact of COVID-19 on Financial Statements Results and Disclosure: First Insights from Italian Listed Companies

Tibiletti¹,

Marchini²,

Gamba³

et al. 2021

ujaf

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In March 2020, given the extended and dangerous nature of the Covid-19 virus, the Italian government issued measures geared towards containing the effect of the pandemic, thereby identifying the national territory as a protected area and limiting the movement of people. This had great repercussions on the productive activities of businesses, which were forced to suspend production. Strong uncertainties, tied both to the time frame, as well as to the impact of Covid-19 on micro and macroeconomic levels, have made it extremely difficult to forecast what future outcomes might be in the short term, that is to say, it is related to the year 2020, and, specifically, on assumptions regarding the future operations of companies. This manuscript proposes a study of financial reporting, as required by accounting standards, which listed companies must provide in regard to disclosure due to Covid-19 as well as in regard to being a going concern. After having examined the main measures adopted by the Italian government, and after having outlined the existing literature on the relevance of the accounting information, an investigation is undertaken to analyze if the companies demonstrated, or failed to demonstrate, consistency in the reporting on future performance, by means of a comparison of what was represented in the financial statements for the year ended on December, 31, 2019, and the results actually achieved as of June, 30, 2020. It will be shown that negative judgments frequently emerge relating to future performance and that no critical issues attributable to going concern were found.

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“…Yet, empirical research finds evidence of such benefits. Shakespeare (2020) discusses the link between financial reporting and investment, demonstrating that higher quality financial reporting facilitates investment through lower cost of capital (e.g. Roychowdhury et al 2019, Shroff 2020 whereas internal controls over financial reporting rein in empire-building (Cheng et al 2013).…”

Section: Regulation and Financial Reportingmentioning

confidence: 99%

“…A key role of CEOs is investment. All else equal, higher quality financial reporting leads to a lower cost of capital, thereby facilitating investment (Shakespeare 2020). Also as noted by Shakespeare (2020), many CEOs have an incentive to expand the company through acquisitions (i.e.…”

Section: Management 31 Chief Executive Officersmentioning

confidence: 99%

Preparers and the financial reporting system

McVay

Szerwo

2021

Accounting and Business Research

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We review the accounting and related literature on the preparation of public company financial reports. We highlight numerous impediments to producing high quality financial reports, focusing on the roles of management, the board of directors, and internal audit. Key incentives of the CEO do not encourage investments in financial reporting quality, despite evidence that these investments provide net benefits to the firm, instead, key incentives appear to elicit myopia. We also demonstrate that although theoretically the board of directors and internal audit are integral components of firms' internal controls, in practice there are numerous obstacles to effective oversight, including a lack of independence from management. Recent regulations have lessened but not fully mitigated these concerns.

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Reporting matters: the real effects of financial reporting on investing and financing decisions

Cited by 31 publications

References 90 publications

CSR disclosure and state ownership: implications for earnings management and market value

CSR disclosure and state ownership: implications for earnings management and market value

The Impact of COVID-19 on Financial Statements Results and Disclosure: First Insights from Italian Listed Companies

Preparers and the financial reporting system

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