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Consequences of financial reporting quality on corporate performance. Evidence at the international level

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  • Jennifer Martínez-Ferrero

Abstract

This paper examines the consequences of Financial Reporting Quality (FRQ) on Corporate Performance, using three proxies of FRQ: (i) earnings quality; (ii) conservatism; and (iii) accruals quality. Our purpose is to analyze the effect of a good FRQ on financial performance (FP) measured by the market to book ratio. To this end, the proposed hypotheses are tested on an unbalanced sample of 1, 960 international non-financial listed companies from 25 countries and the special administrative region of Hong-Kong for the period 2002-2010. The use of simultaneous equations for the panel data, via the GMM estimator proposed by Arellano and Bond (1991), highlights the positive effect of financial reporting quality (FRQ) on financial performance. This result ir robust according to the different measurement of FRQ (earnings quality, accruals quality and accounting conservatism) and for an aggregated measure for the previous three proxies of FRQ. The empirical evidence shows that this relationship is moderated by the level of corruption perception in the country of origin of the company, tthe adoption of IFRS, the accounting system used in the country and the influence of the economic cycle.quality (FRQ) on financial performance.

Suggested Citation

  • Jennifer Martínez-Ferrero, 2014. "Consequences of financial reporting quality on corporate performance. Evidence at the international level," Estudios de Economia, University of Chile, Department of Economics, vol. 41(1 Year 20), pages 49-88, June.
    • Handle: RePEc:udc:esteco:v:41:y:2014:i:1:p:49-88
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    More about this item

    Keywords

    Financial Reporting Quality (FRQ); Financial Performance (FP); Accruals Quality (AQ); Earnings Quality (EQ); Accounting Conservatism.;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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