Title

Quality of financial reporting and uncertainty: role of political signals and life cycle

Abstract/Description

The empirical literature on financial reporting quality primarily focuses on finding its determinants within the firm. Using annual firm data in the United States from 1987-2019, this study investigates certain outside factors, particularly the economic policy uncertainty and the political signal quality, in addition to the firms’ life cycle stage. Our findings suggest that a rise in economic uncertainty is associated with increased quality of financial reporting. However, this relationship is weaker in the presence of low political quality signals. We also find that firms in the early stage of their life cycle display lower quality of financial reporting while those in mature stages have better reporting standards.

Track

Accounting, Law, and Finance

Session Number/Theme

Session 2A

Session Chair

Dr. Hilal Anwar Butt, Institute of Business Administration, Karachi

Session Discussant

Tahira Mariam Jaffery; Zaira Anees; Dr. Sharjeel Ahmed Hasnie; Dr. Falik Shear

Start Date/Time

23-6-2022 3:50 PM

End Date/Time

23-6-2022 4:10 PM

Location

Training Room 3, Marriott Hotel, Karachi

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Jun 23rd, 3:50 PM Jun 23rd, 4:10 PM

Quality of financial reporting and uncertainty: role of political signals and life cycle

Training Room 3, Marriott Hotel, Karachi

The empirical literature on financial reporting quality primarily focuses on finding its determinants within the firm. Using annual firm data in the United States from 1987-2019, this study investigates certain outside factors, particularly the economic policy uncertainty and the political signal quality, in addition to the firms’ life cycle stage. Our findings suggest that a rise in economic uncertainty is associated with increased quality of financial reporting. However, this relationship is weaker in the presence of low political quality signals. We also find that firms in the early stage of their life cycle display lower quality of financial reporting while those in mature stages have better reporting standards.