How to measure country-level financial reporting quality?
Journal of Financial Reporting and Accounting
ISSN: 1985-2517
Article publication date: 3 October 2016
Abstract
Purpose
The purpose of this study is to measure the financial reporting quality of 38 main countries (regions) in the world from 2000 to 2014.
Design/methodology/approach
This paper uses six accounting and auditing indicators to construct a comprehensive index for the measurement of country-level financial reporting quality. To test the validity of the methodology, the index to test institutional impacts on national financial reporting quality is used.
Findings
It was found that the results are consistent with the predictions and previous studies. The evidence suggests that the quality measure in this paper is innovative and appropriate and can provide a useful tool for researchers who are concerned with financial reporting quality at the country level.
Originality/value
The study is the first in the literature to use both accounting and auditing data to construct financial reporting quality indicators. The study should help international investors assess investment risks in foreign financial markets so as to make an informed decision. In addition, the diversity of financial reporting practices documented in the paper should prompt market regulators, accounting standard setters and professional accounting bodies to reinforce the efforts on international convergence of accounting and financial reporting standards and practices.
Keywords
Acknowledgements
The authors thank the participants at the 6th International Conference on Asian Financial Markets, Fukuoka, Japan; the 7th International Business Research Conference, Sydney; Western Sydney University; the University of South Australia; and Neal Arthur and Sidney Gray for their insightful comments and suggestions on earlier versions of this paper. Particularly, insightful comments and suggestions from two anonymous reviewers and the editorial support from Professor Mustaffa Mohamed Zain, the Journal Editor, are highly appreciated. In addition, Dr Qingliang Tang acknowledges the financial support of the Accounting & Finance Association of Australia and New Zealand and the School of Business, Western Sydney University, for the project. Dr Huifa Chen acknowledges the financial support of the grants of the National Social Science Fund of China (NSSFC, No. 14CJY006).
Citation
Tang, Q., Chen, H. and Lin, Z. (2016), "How to measure country-level financial reporting quality?", Journal of Financial Reporting and Accounting, Vol. 14 No. 2, pp. 230-265. https://doi.org/10.1108/JFRA-09-2014-0073
Publisher
:Emerald Group Publishing Limited
Copyright © 2016, Emerald Group Publishing Limited