Social capital accounting and financial performance improvement: the role of financial information reliability as a mediator

Abstract

Purpose

The purpose of this paper is to investigate the role of accounting measurement and disclosure of social capital (AMDSC) in improving financial performance (FP) in industrial companies in the Kurdistan Region of Iraq (KRG) and Sulaimani city. The research also examines the mediating role of reliability of financial information (RFI) between AMDSC and FP.

Design/methodology/approach

This research uses SmartPLS to analyze the questionnaire that was sent to 10 industrial companies operating in the iron sector during 2021.

Findings

The findings reveal that AMDSC has a significant effect on improving the FP of the industrial companies in KRG. The results also confirm that the RFI mediates between AMDSC and FP. Thus, this suggests that social capital (SC) needs to be considered in the companies’ strategy to secure future financing in this area.

Research limitations/implications

This paper is limited to the iron sector of KRG/Sulaimani city. Future studies could address other sectors, such as sugar, cement, clothes, automobiles and medicines.

Originality/value

This paper focuses on improving FP in industrial companies in KRG and Sulaimani city through considering SC in their companies’ strategies, as there was no concern for SC in KRG before.

Citation

Rashid, C.A. (2023), "Social capital accounting and financial performance improvement: the role of financial information reliability as a mediator", Journal of Islamic Accounting and Business Research, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JIABR-01-2023-0001