ANALYSIS OF FINANCIAL REPORTING QUALITY (CASE STUDY IN THE COVID-19 PANDEMIC PERIOD)
DOI:
https://doi.org/10.37932/35kveg39Kata Kunci:
financial reporting quality, going concern, liquidity, impairment, contract modification, and fair valueAbstrak
The COVID-19 pandemic outbreak has transformed every aspect of human life worldwide, including the financial sector. This study aims to examine the comparison of financial reporting quality before and during the COVID-19 pandemic period. The data for analysis were derived from the financial reports of the companies listed on the Indonesia Stock Exchange (IDX). For the case pre-pandemic, the data were obtained from 2016-2019 while those during the pandemic were in 2020 since the spread of the outbreak. The data analysis showed that the results varied on several research models. What is a going concern was assets impairment and firm size as the factors with a negative effect on the quality of financial reporting during the pandemic. However, the level of liquidity, contract modifications, and company growth had a positive impact on the quality of financial reporting during the pandemic. Generally, the financial reporting quality during the pandemic improved compared to that before the COVID-19 pandemic.
Keywords: financial reporting quality, going concern, liquidity, impairment, contract modification, and fair value
Unduhan
Referensi
C. Indonesia, “The Impact of the Corona Recession Flows to Various Sectorsâ€.,†2020. [Online]. Available: https://www.cnnindonesia.com/ekonomi/20200908105412-532-543899/dampak-resesi-corona-mengalir-ke-vari-sector .
D. A. Cohen, Quality of financial reporting choice: Determinants and economic consequences. Northwestern University, 2004.
M. Mitevska, O. Gjorgieva-Trajkovska, and V. G. Svrtinov, “Covid-19 implications on financial reporting,†J. Econ., vol. 6, pp. 196–203, 2021.
L. Van Der Tas, “The novel coronavirus (COVID-19) pandemic presents huge challenges for preparers of financial statements. Here are 5 financial reporting issues to consider,†2020. .
E. Ruiz-Barbadillo †, N. Gómez-Aguilar, C. De Fuentes-Barberá, and M. A. GarcÃa-Benau, “Audit quality and the going-concern decision-making process: Spanish evidence,†Eur. Account. Rev., vol. 13, no. 4, pp. 597–620, Dec. 2004, doi: 10.1080/0963818042000216820.
R. Barniv, M. J. Myring, and W. B. Thomas, “The association between the legal and financial reporting environments and forecast performance of individual analysts,†Contemp. Account. Res., vol. 22, no. 4, pp. 727–758, 2005.
P. B. W. Miller and P. R. Bahnson, Quality Financial Reporting. New York: McGraw-Hill, 2002.
S. Rajgopal and M. Venkatachalam, “Financial reporting quality and idiosyncratic return volatility,†J. Account. Econ., vol. 51, no. 1–2, pp. 1–20, 2011.
A. K. Sharma, S. Kumar, and R. Singh, “Value Relevance of Financial Reporting and Its Impact on Stock Prices: Evidence from India.,†South Asian J. Manag., vol. 19, no. 2, 2012.
O. Erin, P. Olojede, and O. Ogundele, “Value relevance of accounting data in the pre and post IFRS era: Evidence from Nigeria,†Int. J. Financ. Account., vol. 6, no. 4, pp. 95–103, 2017.
F. Chen, O.-K. Hope, Q. Li, and X. Wang, “Financial reporting quality and investment efficiency of private firms in emerging markets,†Account. Rev., vol. 86, no. 4, pp. 1255–1288, 2011.
M. Salehi, M. Tagribi, and S. Farhangdoust, “The effect of reporting quality on stock returns of listed companies on the Tehran Stock Exchange,†Int. J. Product. Perform. Manag., 2018.
R. Valentin and T. Isa, “Financial crisis’ effects on financial reporting,†Econ. Sci. Ser., p. 1141, 2011.
M. Pinnuck, “A Review of the Role of Financial Reporting in the Global Financial Crisis,†Aust. Account. Rev., vol. 22, Mar. 2012, doi: 10.1111/j.1835-2561.2011.00155.x.
S. Sutthachai and T. E. Cooke, “An analysis of Thai financial reporting practices and the impact of the 1997 economic crisis,†Abacus, vol. 45, no. 4, pp. 493–517, 2009.
K. S. Bardos, “Quality of financial information and liquidity,†Rev. Financ. Econ., vol. 20, no. 2, pp. 49–62, 2011.
M. C. HUIAN, “Stakeholders’ participation in the development of the new accounting rules regarding the impairment of financial assets,†Bus. Manag. Dyn., vol. 2, no. 9, p. 23, 2013.
L. Paugam and O. Ramond, “Effect of impairmentâ€testing disclosures on the cost of equity capital,†J. Bus. Financ. Account., vol. 42, no. 5–6, pp. 583–618, 2015.
R. Mala and P. Chand, “Effect of the global financial crisis on accounting convergence,†Account. Financ., vol. 52, no. 1, pp. 21–46, 2012.
L. Shivakumar, “The role of financial reporting in debt contracting and in stewardship,†Account. Bus. Res., vol. 43, no. 4, pp. 362–383, 2013.
E. Menicucci, “Fair Value Accounting and Earnings Quality,†in Earnings Quality, Springer, 2020, pp. 107–137.
S. Baek, S. K. Mohanty, and M. Glambosky, “COVID-19 and stock market volatility: An industry level analysis,†Financ. Res. Lett., vol. 37, p. 101748, 2020.
R. Watts and L. Zuo, “Understanding practice and institutions: A historical perspective,†Account. horizons, vol. 30, no. 3, pp. 409–423, 2016.
S. Zeff, J. Glover, A. Arya, S. Sunder, A. Beyer, and R. Verrecchia, “Financial reporting quality: Is fair value a plus or a minus?,†Account. Rev., vol. 89, no. 2, pp. 791–801, 2014.
K. Menon and K. B. Schwartz, “An empirical investigation of audit qualification decisions in the presence of going concern uncertainties,†Contemp. Account. Res., vol. 3, no. 2, pp. 302–315, 1987.
A. D. Blay, M. A. Geiger, and D. S. North, “The auditor’s going-concern opinion as a communication of risk,†Audit. A J. Pract. Theory, vol. 30, no. 2, pp. 77–102, 2011.
V. D. Krasnov and S. V Kozmenkova, “Going concern principle: The essence and economic conditionality,†Int. Account., vol. 20, no. 19, pp. 1147–1162, 2017.
M. J. Peel, “The going-concern qualification debate: Some UK evidence,†Br. Account. Rev., vol. 21, no. 4, pp. 329–350, 1989, doi: https://doi.org/10.1016/0890-8389(89)90032-2.
W. Jiang, K. H. Rupley, and J. Wu, “Internal control deficiencies and the issuance of going concern opinions,†Res. Account. Regul., vol. 22, no. 1, pp. 40–46, 2010.
S. Hamidzadeh and M. Zeinali, “The asset structure and liquidity effect on financial reporting quality at listed companies in Tehran stock exchange,†Arab. J. Bus. Manag. Rev. (OMAN Chapter) Vol, 2015.
K. Kosmidou, D. Kousenidis, A. Ladas, and C. Negkakis, “Regulation of capital flows: Effects on liquidity and the role of financial reporting quality,†J. Econ. Behav. Organ., vol. 175, pp. 86–97, 2020.
A. Al Masud, “Factors Determining Financial Reporting Quality: An Empirical Study on the Publicly Listed Food and Allied Companies of Bangladesh,†Int. J. Manag. Account. Econ., 2022.
I. Okwuosa, “Impairment Accounting Practice And Financial Reporting Regulatory Support In Nigeria: The View Of Financial Reporting Accountants,†Int. J. Account. Financ., vol. 10, no. 1, pp. 19–40, 2021.
A. Hołda and A. Staszel, “Czynniki wpływające na raportowanie odpisów z tytułu utraty wartości rzeczowych aktywów trwałych przez spółki notowane na Giełdzie Papierów Wartościowych w Warszawie,†Zesz. Teoretyczne Rachun., no. 108 (164), pp. 41–60, 2020.
J. Al-Abbas, J. Al Dulamy, K. Jomaa Muter, and A. Oubaid, “Relationship analysis between financial reporting of tourism companies on impairment asset value and accounting information: An applied study,†Jan. 2020.
N. I. Karampinis, “A cross-national analysis on the impact of enforcement on impairments of tangible assets under IFRS.,†J. Int. Accounting, Audit. Tax., vol. 42, 2021.
D. Bens, S. Huang, L. Tan, and W. Wongsunwai, “Contracting and reporting conservatism around a change in fiduciary duties,†Contemp. Account. Res., vol. 37, no. 4, pp. 2472–2500, 2020.
N. G. Lisovskaya, I. A. Trapeznikova, “Procedure for Accounting for Modifications of the Lease Agreement in the Lessee’s Reporting,†Int. Account., vol. 23, no. 11, pp. 1198–1219, 2020.
N. M. Ramli, A. R. A. Rahman, A. Marzuki, and M. M. Marzuki, “Implementation of IFRS 13 Fair Value Measurement: Issues and Challenges faced by the Islamic Financial Institutions in Malaysia,†J. Pengur., 2021.
X. Chen, A. Hellmann, and S. R. Mithani, “The Effect of Fair Value Adjustments on Dividend Policy Under Mandatory International Financial Reporting Standards Adoption: Australian Evidence,†Abacus, vol. 56, no. 3, pp. 436–453, 2020.
P. Sangchan, M. B. U. Bhuiyan, and A. Habib, “Value-relevance of reported changes in fair values and measurement-related fair value disclosures: evidence from the Australian real estate industry,†Asian Rev. Account., 2021.
O. Georgiou, E. Mantzari, and J. Mundy, “Problematising the decision-usefulness of fair values: empirical evidence from UK financial analysts,†Account. Bus. Res., vol. 51, no. 4, pp. 307–346, 2021.
E. E. Alharasis, C. Clark, and M. Prokofieva, “External Audit Fees and Fair Value Disclosures among Jordanian Listed Companies: Does the Type of Corporate Industry Matter?,†Asian J. Bus. Account., vol. 14, no. 2, 2021.
B. Oyewo, E. Emebinah, and R. Savage, “Challenges in auditing fair value measurement and accounting estimates: Some evidence from the field,†J. Financ. Report. Account., 2020.
C. Indonesia, “The Impact of the Corona Recession Flows to Various Sectorsâ€.,†2020. [Online]. Available: https://www.cnnindonesia.com/ekonomi/20200908105412-532-543899/dampak-resesi-corona-mengalir-ke-vari-sector .
D. A. Cohen, Quality of financial reporting choice: Determinants and economic consequences. Northwestern University, 2004.
M. Mitevska, O. Gjorgieva-Trajkovska, and V. G. Svrtinov, “Covid-19 implications on financial reporting,†J. Econ., vol. 6, pp. 196–203, 2021.
L. Van Der Tas, “The novel coronavirus (COVID-19) pandemic presents huge challenges for preparers of financial statements. Here are 5 financial reporting issues to consider,†2020. .
E. Ruiz-Barbadillo †, N. Gómez-Aguilar, C. De Fuentes-Barberá, and M. A. GarcÃa-Benau, “Audit quality and the going-concern decision-making process: Spanish evidence,†Eur. Account. Rev., vol. 13, no. 4, pp. 597–620, Dec. 2004, doi: 10.1080/0963818042000216820.
R. Barniv, M. J. Myring, and W. B. Thomas, “The association between the legal and financial reporting environments and forecast performance of individual analysts,†Contemp. Account. Res., vol. 22, no. 4, pp. 727–758, 2005.
P. B. W. Miller and P. R. Bahnson, Quality Financial Reporting. New York: McGraw-Hill, 2002.
S. Rajgopal and M. Venkatachalam, “Financial reporting quality and idiosyncratic return volatility,†J. Account. Econ., vol. 51, no. 1–2, pp. 1–20, 2011.
A. K. Sharma, S. Kumar, and R. Singh, “Value Relevance of Financial Reporting and Its Impact on Stock Prices: Evidence from India.,†South Asian J. Manag., vol. 19, no. 2, 2012.
O. Erin, P. Olojede, and O. Ogundele, “Value relevance of accounting data in the pre and post IFRS era: Evidence from Nigeria,†Int. J. Financ. Account., vol. 6, no. 4, pp. 95–103, 2017.
F. Chen, O.-K. Hope, Q. Li, and X. Wang, “Financial reporting quality and investment efficiency of private firms in emerging markets,†Account. Rev., vol. 86, no. 4, pp. 1255–1288, 2011.
M. Salehi, M. Tagribi, and S. Farhangdoust, “The effect of reporting quality on stock returns of listed companies on the Tehran Stock Exchange,†Int. J. Product. Perform. Manag., 2018.
R. Valentin and T. Isa, “Financial crisis’ effects on financial reporting,†Econ. Sci. Ser., p. 1141, 2011.
M. Pinnuck, “A Review of the Role of Financial Reporting in the Global Financial Crisis,†Aust. Account. Rev., vol. 22, Mar. 2012, doi: 10.1111/j.1835-2561.2011.00155.x.
S. Sutthachai and T. E. Cooke, “An analysis of Thai financial reporting practices and the impact of the 1997 economic crisis,†Abacus, vol. 45, no. 4, pp. 493–517, 2009.
K. S. Bardos, “Quality of financial information and liquidity,†Rev. Financ. Econ., vol. 20, no. 2, pp. 49–62, 2011.
M. C. HUIAN, “Stakeholders’ participation in the development of the new accounting rules regarding the impairment of financial assets,†Bus. Manag. Dyn., vol. 2, no. 9, p. 23, 2013.
L. Paugam and O. Ramond, “Effect of impairmentâ€testing disclosures on the cost of equity capital,†J. Bus. Financ. Account., vol. 42, no. 5–6, pp. 583–618, 2015.
R. Mala and P. Chand, “Effect of the global financial crisis on accounting convergence,†Account. Financ., vol. 52, no. 1, pp. 21–46, 2012.
L. Shivakumar, “The role of financial reporting in debt contracting and in stewardship,†Account. Bus. Res., vol. 43, no. 4, pp. 362–383, 2013.
E. Menicucci, “Fair Value Accounting and Earnings Quality,†in Earnings Quality, Springer, 2020, pp. 107–137.
S. Baek, S. K. Mohanty, and M. Glambosky, “COVID-19 and stock market volatility: An industry level analysis,†Financ. Res. Lett., vol. 37, p. 101748, 2020.
R. Watts and L. Zuo, “Understanding practice and institutions: A historical perspective,†Account. horizons, vol. 30, no. 3, pp. 409–423, 2016.
S. Zeff, J. Glover, A. Arya, S. Sunder, A. Beyer, and R. Verrecchia, “Financial reporting quality: Is fair value a plus or a minus?,†Account. Rev., vol. 89, no. 2, pp. 791–801, 2014.
K. Menon and K. B. Schwartz, “An empirical investigation of audit qualification decisions in the presence of going concern uncertainties,†Contemp. Account. Res., vol. 3, no. 2, pp. 302–315, 1987.
A. D. Blay, M. A. Geiger, and D. S. North, “The auditor’s going-concern opinion as a communication of risk,†Audit. A J. Pract. Theory, vol. 30, no. 2, pp. 77–102, 2011.
V. D. Krasnov and S. V Kozmenkova, “Going concern principle: The essence and economic conditionality,†Int. Account., vol. 20, no. 19, pp. 1147–1162, 2017.
M. J. Peel, “The going-concern qualification debate: Some UK evidence,†Br. Account. Rev., vol. 21, no. 4, pp. 329–350, 1989, doi: https://doi.org/10.1016/0890-8389(89)90032-2.
W. Jiang, K. H. Rupley, and J. Wu, “Internal control deficiencies and the issuance of going concern opinions,†Res. Account. Regul., vol. 22, no. 1, pp. 40–46, 2010.
S. Hamidzadeh and M. Zeinali, “The asset structure and liquidity effect on financial reporting quality at listed companies in Tehran stock exchange,†Arab. J. Bus. Manag. Rev. (OMAN Chapter) Vol, 2015.
K. Kosmidou, D. Kousenidis, A. Ladas, and C. Negkakis, “Regulation of capital flows: Effects on liquidity and the role of financial reporting quality,†J. Econ. Behav. Organ., vol. 175, pp. 86–97, 2020.
A. Al Masud, “Factors Determining Financial Reporting Quality: An Empirical Study on the Publicly Listed Food and Allied Companies of Bangladesh,†Int. J. Manag. Account. Econ., 2022.
I. Okwuosa, “Impairment Accounting Practice And Financial Reporting Regulatory Support In Nigeria: The View Of Financial Reporting Accountants,†Int. J. Account. Financ., vol. 10, no. 1, pp. 19–40, 2021.
A. Hołda and A. Staszel, “Czynniki wpływające na raportowanie odpisów z tytułu utraty wartości rzeczowych aktywów trwałych przez spółki notowane na Giełdzie Papierów Wartościowych w Warszawie,†Zesz. Teoretyczne Rachun., no. 108 (164), pp. 41–60, 2020.
J. Al-Abbas, J. Al Dulamy, K. Jomaa Muter, and A. Oubaid, “Relationship analysis between financial reporting of tourism companies on impairment asset value and accounting information: An applied study,†Jan. 2020.
N. I. Karampinis, “A cross-national analysis on the impact of enforcement on impairments of tangible assets under IFRS.,†J. Int. Accounting, Audit. Tax., vol. 42, 2021.
D. Bens, S. Huang, L. Tan, and W. Wongsunwai, “Contracting and reporting conservatism around a change in fiduciary duties,†Contemp. Account. Res., vol. 37, no. 4, pp. 2472–2500, 2020.
N. G. Lisovskaya, I. A. Trapeznikova, “Procedure for Accounting for Modifications of the Lease Agreement in the Lessee’s Reporting,†Int. Account., vol. 23, no. 11, pp. 1198–1219, 2020.
N. M. Ramli, A. R. A. Rahman, A. Marzuki, and M. M. Marzuki, “Implementation of IFRS 13 Fair Value Measurement: Issues and Challenges faced by the Islamic Financial Institutions in Malaysia,†J. Pengur., 2021.
X. Chen, A. Hellmann, and S. R. Mithani, “The Effect of Fair Value Adjustments on Dividend Policy Under Mandatory International Financial Reporting Standards Adoption: Australian Evidence,†Abacus, vol. 56, no. 3, pp. 436–453, 2020.
P. Sangchan, M. B. U. Bhuiyan, and A. Habib, “Value-relevance of reported changes in fair values and measurement-related fair value disclosures: evidence from the Australian real estate industry,†Asian Rev. Account., 2021.
O. Georgiou, E. Mantzari, and J. Mundy, “Problematising the decision-usefulness of fair values: empirical evidence from UK financial analysts,†Account. Bus. Res., vol. 51, no. 4, pp. 307–346, 2021.
E. E. Alharasis, C. Clark, and M. Prokofieva, “External Audit Fees and Fair Value Disclosures among Jordanian Listed Companies: Does the Type of Corporate Industry Matter?,†Asian J. Bus. Account., vol. 14, no. 2, 2021.
B. Oyewo, E. Emebinah, and R. Savage, “Challenges in auditing fair value measurement and accounting estimates: Some evidence from the field,†J. Financ. Report. Account., 2020.
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