World Wide Voluntary Corporate Financial Reporting in an Unregulated Setting


Speaker


Abstract

In this study we examine the effect of several factors that influence voluntary financial reporting in an unregulated setting.  In 1925 legislation and regulation on financial reporting disclosure in the US, the UK, the Netherlands, Belgium, Germany, and France were minimal. Although a balance sheet and income statement were required, almost no details of these statements were prescribed. Previous research by Hatfield (1966, JAR) indicates that even in the early 20th century financial reporting in the US and UK differs largely from continental European countries. Although Rajan and Zingales (2003, JFE) showed that capital markets in France, Belgium and the Netherlands are equally developed as those of the UK and the US in 1913 and 1929.  We built upon previous research like Barton and Waymire (US, 2004, JAE) and Arnold and Matthews (UK, 2002, ABR) to investigate whether the factors identified in their research also effect financial reporting in the Netherlands, Belgium, Germany and France.

The analysis of over 200 corporate annual reports in these six countries indicates that there are specific country differences in voluntary financial reporting. In addition, we find that several contextual factors (size, leverage, profitability, auditor involvement) as well as institutional factors (capital markets, legal system and professional system) affect voluntary financial reporting. For the US and the Netherlands we find that size, auditor involvement, age, ownership(structure) and industry have a significant positive influence on voluntary financial reporting. The dominant presence of the SGB/GMB (Société Général, a universal bank) and other universal/mixed banks explain partly the observed uniformity in corporate financial reports in Belgium. This suggests that financial reporting in an unregulated setting is highly dependent on factors that are currently seen as factors that might explain differences in international financial reporting (e.g. Nobes, (2004, AOS), Ali & Hwang (2000, JAR), Guenther & Young (JAE, 2000) and Ball, Kothari and Robin (2000, JAE)).

Contact information:
Paolo Perego
Email