Who Uses Financial Reports and for What Purpose? Evidence from Capital Providers

Cascino, Stefano; Clatworthy, Mark; Osma, Beatriz Garcı́a; Gassen, Joachim; Imam, Shahed; Jeanjean, Thomas

doi:10.1080/17449480.2014.940355

Cited by 91 publications

(37 citation statements)

References 210 publications

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“…Firstly, lowering the threshold for the mandatory keeping of accounts should increase the number of enterprises maintaining accounting books. This is important for countries such as Poland, where internal reporting systems are underdeveloped, as the financial accounting system may perform a highly influential role in guiding business decisions (Cascino et al, 2014). Secondly, increasing the role of the accounting system could help companies to benefit from better access to external finance, and monitoring by lending banks and, as a consequence, higher lender demand for more informative earnings could force companies to adopt more advanced accounting practices.…”

Section: Resultsmentioning

confidence: 99%

Private SME accounting in Poland. Does bank lending influence their accounting and financial reporting practice?

Białek‐Jaworska¹

2017

JAMIS

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Using data from private Polish Small and Medium-sized Entities (SMEs) for 2003-2013, I investigate in this paper the influence of bank borrowing on their book-tax conformity and accounting practices. In order to verify the importance of the link between tax law and the accounts of private firms, I created variables capturing the records according to local GAAP and I separated records in line with tax rules reflecting the impact of tax law on the accounting practices. Besides the book-tax differences measurement proposed by Watrin et al. (2014), I applied Tang's (2015) approach to estimate book-tax conformity that captures permanent and temporary book-tax differences. I find that bank lending increases the book-tax conformity of profitable firms. Tax avoidance applied by borrowers has a lower impact on book-tax differential than in the case of non-borrowers. Moreover, the findings indicate that monitoring by lenders force SMEs to adopt more advanced accounting practices by adhering to the prudence principle. This allows lenders to learn more about the ability of borrowers to repay loans thanks to more informative earnings. However, only 22.5% of borrowers applied accounting standards that are not recognized by tax law.

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Section: Resultsmentioning

confidence: 99%

Private SME accounting in Poland. Does bank lending influence their accounting and financial reporting practice?

Białek‐Jaworska¹

2017

JAMIS

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“…Nevertheless, capital market participants are not the only nor the most dominant capital providers in Europe. According to Cascino et al (2014), virtually all European companies rely on bank loans and trade creditors for capital, and these jointly represent around 70% of the total liabilities in the typical balance sheet. Therefore, capital providers are not homogeneous, and their information needs differ systematically.…”

Section: Discussionmentioning

confidence: 99%

Issues in the Recognition versus Disclosure of Financial Information Debate

Novak

2016

Naše Gospodarstvo/Our Economy

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Empirical evidence from the academic literature on capital market effects of financial information placement (i.e., recognition on the face of the primary financial statements versus disclosure in the notes to the financial statements) is not straightforward. Therefore, the purpose of this paper is to contribute to the recognition versus required disclosure debate in a standard-setting context by exploring possible reasons for perceived differences between recognized and disclosed amounts. These differences, in our view, arise due to demonstrated auditors’ greater tolerance for misstatement in disclosed amounts, allowed noncompliance with disclosure requirements even in strong enforcement regimes, lesser care that preparers of financial statements devote to disclosures relative to recognized items as well as behavioural factors and differential processing costs related to the users of financial information. We believe that these arguments strengthen the case for the general preference for the recognition of financial information in the standard-setting context. The original scientific contribution of this paper is to systematically identify the reasons for the differences between recognized and disclosed amounts in financial statements. As such, this paper may provide a suitable basis for the justification of certain conceptual changes in the field of international accounting standards that are currently underway.

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“…Retail investors are characterized as lacking sophistication: they have at best a cursory understanding of investing and of disclosures that firms and financial intermediaries offer, and they make mistakes during financial calculations (Calvet, Campbell, and Sodini, 2009;van Rooij, Lusardi, and Alessie, 2011). Sophisticated investors have the time and resources to analyze disclosures, and they do not make mistakes during financial calculations (Cascino, Clatworthy, García Osma, Gassen, Imam, and Jeanjean, 2014;Calvet et al, 2009;Nelson and Tayler, 2007). Often, institutional investors (e.g., pension funds, mutual funds, hedge funds) are considered sophisticated, since they employ individuals educated in finance and accounting, and focus their activities on investments and disclosures.…”

Section: Investors Can Be Deceived By Disclosuresmentioning

confidence: 99%

Smoke and Mirrors? Disclosures in the Marijuana Industry in Canada

Mangen¹,

Paduano²,

Paduano³

et al. 2020

Accounting Perspectives

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Licensed producers (LPs) of marijuana in Canada are embedded in a highly competitive industry where they raise funds from investors to finance their growth. They face substantial risks from the uncertain legal status of marijuana and from its unsettled health and safety consequences. We argue that this context stands to have implications for the disclosures of firms in the marijuana industry. We rely on a multicase study of three large Canadian LPs to explore their mandatory and voluntary disclosures during the third quarter of 2018. We find that their mandatory interim disclosures are largely consistent with disclosure rules that target marijuana operations. We also find that they make voluntary disclosures relevant for their context (e.g., about risks from legal, health, and safety consequences), and that there is variation in these disclosures. We use our findings as a springboard for discussing the antecedents of mandatory and voluntary disclosures in the marijuana industry (i.e., proprietary costs, investor interest, detection costs of selective disclosures), and their consequence (i.e., lack of comparability). We offer suggestions for future research.

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Who Uses Financial Reports and for What Purpose? Evidence from Capital Providers

Cited by 91 publications

References 210 publications

Private SME accounting in Poland. Does bank lending influence their accounting and financial reporting practice?

Private SME accounting in Poland. Does bank lending influence their accounting and financial reporting practice?

Issues in the Recognition versus Disclosure of Financial Information Debate

Smoke and Mirrors? Disclosures in the Marijuana Industry in Canada

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