Abstract:

Purpose: The quality of financial reporting represents a major challenge for modern firms, as well as for all stakeholders. It is indicative that international standards are developed in order to ensure the relevance, comparability, understandability, faithful representation and timeliness of official financial statements. Under this framework, the present research investigates the factors which affect the quality of financial reporting and more precisely, firm size, audit firm size, geographical location, leverage, liquidity and profitability.
Design/methodology/approach: The quantitative approach was selected and regression analyses were used to provide answers to the research questions. Quality was chosen as the dependent variable, measured using the results of a previous study. First, a regression model was developed in order to reveal correlations between the variables. Then, each independent variable was correlated with the dependent variable (quality) and different regression models were developed for each correlation.
Findings: Firm size, audit firm size, geographical distribution, and more precisely the location of the headquarters are positively correlated with the quality of financial reporting. Profitability is negatively correlated with the quality of financial reporting, while leverage is not correlated with the quality of financial reporting. Besides, the quality of financial reporting depends on the interaction of all the variables and the initial model interprets this relationship in a satisfactory way.