Readability of Financial Footnotes, Audit Fees, and Risk Management Committee

Prabhawa, Aditya Aji; Harymawan, Iman

doi:10.3390/risks10090170

Cited by 7 publications

(9 citation statements)

References 63 publications

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“…The view that independent directors are associated with improved corporate reporting readability agreed with that of Harjoto et al (2020) in the USA. Elbadry et al (2015) and Harjoto et al (2020) agreed with the findings of Prabhawa and Harymawan (2022) in Indonesia during 2014 to 2018 and studied 758 companies and found that independent directorships in firms significantly enhanced the relationship between readability of financial statements as measured by FOG index and audit fees.…”

Section: Empirical Literature Reviewsupporting

confidence: 84%

Sustainability reporting, board diversity, earnings management and financial statements readability: evidence from an emerging economy

Ndegwa

2023

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Purpose This paper aims to investigate the moderating effect of sustainability reporting on the relationship between the independent variables of board diversity, and earnings management and the dependent variable of readability of financial statements. Design/methodology/approach The study panel data regression analysis involved 36 Kenyan-listed companies from 2016 to 2020. Findings Key findings were that increased board diversity was found to significantly improve the readability of financial statements. Discretionary earnings management was found to significantly reduce the readability of financial statements. Sustainability reporting was found to significantly increase the readability of financial statements, and it moderated the relationship between board diversity, earnings management and financial statements readability in Kenya. Research limitations/implications The study sample of 36 non-financial listed in the Nairobi Securities Exchange was very small and was affected by the problem of thin trading; hence, caution should be adopted when interpreting the findings. Practical implications The Capital Markets Authorities (CMA) as a policymaker should enforce sustainability reporting by Kenyan listed firms as there is evidence that the reporting enhances the readability of financial statements. The Institute of Certified Public Accountants as a policymaker should closely monitor the published financial statements of firms for earnings management and punish the perpetrators, as there is empirical evidence that the practice reduces the readability of financial statements. Social implications Sustainability reporting is successful as a moderating variable between readability of financial statements and determinants of readability of financial statements. Originality/value This study contributes to knowledge by studying sustainability reporting as a moderating variable between the independent variables of board diversity and earnings management and the dependent variable of readability of financial statements and measured sustainability reporting using a dummy variable for the period before and after the enactment and release of CMA code of 2016 on corporate governance that required sustainability reporting by Kenyan listed companies.

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Section: Empirical Literature Reviewsupporting

confidence: 84%

Sustainability reporting, board diversity, earnings management and financial statements readability: evidence from an emerging economy

Ndegwa

2023

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“…It also supports their differences in interests (Prabhawa and Harymawan 2022). The agents are responsible for any tasks or decisions that occur within the company on behalf of the principals (Prabhawa and Harymawan 2022). The principal sometimes has goals and interests that differ from those of the agents (Prabhawa and Harymawan 2022;Pratama et al 2022).…”

Section: Agency Costs Complexity Of the Annual Report And Firm Profit...mentioning

confidence: 97%

“…It discusses the relationship between shareholders, as principals, and managers, as agents (Pratama et al 2022;Tarjo 2022). It also supports their differences in interests (Prabhawa and Harymawan 2022). The agents are responsible for any tasks or decisions that occur within the company on behalf of the principals (Prabhawa and Harymawan 2022).…”

Section: Agency Costs Complexity Of the Annual Report And Firm Profit...mentioning

confidence: 97%

“…The agents are responsible for any tasks or decisions that occur within the company on behalf of the principals (Prabhawa and Harymawan 2022). The principal sometimes has goals and interests that differ from those of the agents (Prabhawa and Harymawan 2022;Pratama et al 2022). This leads to a conflict of interest between the two parties because the agents do not consistently achieve the principal's interests, which causes an agency problem (Pratama et al 2022).…”

Section: Agency Costs Complexity Of the Annual Report And Firm Profit...mentioning

confidence: 99%

“…Agency costs are divided into three types: monitoring, bonding, and residual losses (Prabhawa and Harymawan 2022). Monitoring costs are incurred by monitoring managers' behavior Prabhawa and Harymawan 2022).…”

Section: Agency Costs Complexity Of the Annual Report And Firm Profit...mentioning

confidence: 99%

See 2 more Smart Citations

Annual Report Complexity and Firm Profitability: The Roles of Agency Costs and Financial Risk as Moderating Variables: A Case of Egypt

Rasheed

2024

مجلة البحوث المحاسبية

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The complexity of annual reports reduces the quality of the communication between companies and users. The literature has demonstrated that annual reports complexity reduces users' ability to understand, interpret, analyze information, and make decisions, resulting in higher information asymmetry, agency costs, financial risk, and lower profitability. This study examines the relationship between annual reports complexity and firm profitability. It also investigates the moderating effect of agency costs and financial risk on the relationship between annual reports complexity and firm profitability. It depends on a sample of 75 Egyptian companies listed on the EGX 100 index with 450 company-year observations during the period 2016-2021. The complexity of annual reports is measured by the LIX index; firm profitability is measured depending on EPS; agency costs are measured by the operating expense ratio; and financial risk is measured using leverage. The results indicate that annual report complexity has a significant negative impact on firm profitability, suggesting that Egyptian companies with more complex annual reports are less profitable. Furthermore, the results reveal that both agency costs and financial risk strengthen the relationship between annual report complexity and firm profitability, suggesting that less-readable annual reports increase information asymmetry, companies' agency costs, and financial risk, which reduce their profitability. While this study extends the previous literature on annual report complexity and firm profitability, it examines the moderating effect of agency costs and financial risk on the relationship between annual report complexity and firm profitability of Egyptian companies.

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Large-scale data-driven financial risk management & analysis using machine learning strategies

Murugan¹,

T²,

Marappan³

2023

Measurement: Sensors

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Readability of Financial Footnotes, Audit Fees, and Risk Management Committee

Cited by 7 publications

References 63 publications

Sustainability reporting, board diversity, earnings management and financial statements readability: evidence from an emerging economy

Sustainability reporting, board diversity, earnings management and financial statements readability: evidence from an emerging economy

Annual Report Complexity and Firm Profitability: The Roles of Agency Costs and Financial Risk as Moderating Variables: A Case of Egypt

Large-scale data-driven financial risk management & analysis using machine learning strategies

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