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Opening the “black box” How internal reporting systems contribute to the quality of financial disclosure

Opening the “black box” How internal reporting systems contribute to the quality of financial... Purpose – Institutional investors use the information disclosed by listed companies to analyze the performance of their investments. The purpose of this paper is to open the “black box” of the construction of financial disclosure by analyzing the internal reporting systems of firms with reference to the information disclosed. Design/methodology/approach – Using indexes, the quality of the financial disclosure and the internal reporting systems are measured, and analyzed with a view to finding some links between them. It is expected that the quality of disclosure is dependent on the quality of the internal reporting. Findings – Complex interactions between internal reporting and financial disclosure are revealed, which leads to the identification of a typology of practices. The dependence of the relationship may be troubled by the willingness of the firm to communicate, or by the internal methods of control. According to the various cases, different levels of usefulness of the information for the investor are expected. Originality/value – This paper is a first attempt to analyse information disclosed by firms with regards to the internal information at their disposal. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Applied Accounting Research Emerald Publishing

Opening the “black box” How internal reporting systems contribute to the quality of financial disclosure

Journal of Applied Accounting Research , Volume 12 (3): 25 – Nov 22, 2011

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References (65)

Publisher
Emerald Publishing
Copyright
Copyright © 2011 Emerald Group Publishing Limited. All rights reserved.
ISSN
0967-5426
DOI
10.1108/09675421111187665
Publisher site
See Article on Publisher Site

Abstract

Purpose – Institutional investors use the information disclosed by listed companies to analyze the performance of their investments. The purpose of this paper is to open the “black box” of the construction of financial disclosure by analyzing the internal reporting systems of firms with reference to the information disclosed. Design/methodology/approach – Using indexes, the quality of the financial disclosure and the internal reporting systems are measured, and analyzed with a view to finding some links between them. It is expected that the quality of disclosure is dependent on the quality of the internal reporting. Findings – Complex interactions between internal reporting and financial disclosure are revealed, which leads to the identification of a typology of practices. The dependence of the relationship may be troubled by the willingness of the firm to communicate, or by the internal methods of control. According to the various cases, different levels of usefulness of the information for the investor are expected. Originality/value – This paper is a first attempt to analyse information disclosed by firms with regards to the internal information at their disposal.

Journal

Journal of Applied Accounting ResearchEmerald Publishing

Published: Nov 22, 2011

Keywords: Financial reporting; Disclosure; Financial communication; Quality of information; Public and private disclosure; Indexes

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