International Journal of Finance & Managerial Accounting

International Journal of Finance & Managerial Accounting

Explaining the effect of accounting concepts on the level of risk disclosure in annual financial reporting in companies listed on the Tehran Stock Exchange

Document Type : Original Article

Authors
Ali Mazinani 1
Zahra Lashgari 2
negar kgosravipour 1
1 Assistant professor, Department of Accounting, Central Tehran Branch, Islamic Azad University, Tehran, Iran
2 Assistant professor, Department of Accounting, Central Tehran Branch, Islamic Azad University, Tehran, Iran.
10.30495/ijfma.2022.19526
Abstract
The purpose of this study is to investigate the effect of accounting concepts on the level of risk disclosure in annual financial reporting in companies listed on the Tehran Stock Exchange. In this study, five indicators (Financial Distress, accounting conservatism, level of tax avoidance, Dividend policy and level of corporate social responsibility) have been used to examine accounting concepts. For this purpose, hypotheses were compiled and information related to companies that are members of the stock exchange for the period between 2009 and 2018 were examined and analyzed. The statistical population of the study according to the conditions considered for sample selection, including 140 companies that were selected by systematic elimination method. The research regression model was investigated and tested using the panel data method with a fixed effects approach. The results showed that among the accounting concepts, the index of financial distress and tax avoidance due to the decrease in the level of supervision, transparency and proper disclosure has a significant negative effect on the level of risk disclosure in annual financial reporting. also, the results confirm that Increasing the level of transparency that is part of companies' responsibility for increasing the level of public welfare has a significant positive effect on risk disclosure in annual financial reporting. However, accounting conservatism and corporate dividend policies do not have a significant effect on the level of risk disclosure in annual financial reporting.
Keywords
level of risk disclosure in Annual Financial Reporting
accounting concepts
Corporate Transparency
  • Ebrahimi, Seyed Kazem, Bahrami Nasab, Ali, & Baghian, Javad. (2017). The effect of audit quality and observance of shareholders' rights on the possibility of fraudulent reporting, Auditing Knowledge, 17 (69), pp. 125-149. [In Persian]
  • Aflatooni, Abbas. (2017). Statistical Analysis in Accounting and Financial Management by Eviews, Tehran: Termeh Publications. [In Persian]
  • Heidari, Mehdi, Mansourfar, Gholamreza, and Rezaei, Mehdi. (2016). The Qualitative Effect of Risk Disclosure Components on Information Asymmetry, Regarding To the Moderating Variables, Firm-Riskiness, Economic Downturn and Institutional Analysts in Tehran Stock Exchange, Financial Research Journal, 18 (3), pp. 391-414. [In Persian]
  • Stayesh, Mohammad Hossein and Mansouri, Shole, (2014). The comparative investigation of corporate governance mechanisms in financial distressed and non financial distressed listed companies of Tehran Stock Exchange, Financial Research Journal, 16 (1), pp. 99-112. [In Persian]
  • Taheri, Mandana, Rahmani, Ali, and Soleimani Amiri, Gholamreza, (2019). Value relevance of risk disclosure in Iranian listed banks. Financial Accounting Research, Year 11, Issue 1, Consecutive (39), pp. 1-22. [In Persian]
  • Namazi, Mohammad, and Ebrahimi Meymand, Mehdi. (2016). 'Studying the Disclosure of Risk and Influencial Factors on This Disclosure', Journal of Financial Accounting Knowledge, 3 (2), pp. 1-29, [In Persian]
  • Va’ez, Ali, & Afri, Amjad, (2015), The Effect of the Quality Rating of Companies' Information Disclosure on the Investment Efficiency of Managers. First International Conference on Accounting, Management and Economics Auditing, Isfahan, Conference Secretariat. [In Persian]
  • Alkurdi, A., Hossainey, KH,. Tahat, Y,. Aladwan, M. (2019). The Impact of Corporate Governance on Risk Disclosure: Jordanian Evidence, Academy of Accounting and Financial Studies Journal, 2019 Vol: 23 Issue: 1.
  • Andrew,C, C. Shuping ,C. Adam,E and Bin ,M. (2018). Does Long-Term Earnings Guidance Mitigate Managerial Myopia?. www. ssrn.com /abstract=2570037
  • Beretta, S., Bozzolan, S., (2004) A framework for the analysis of firm risk communication The International Journal of Accounting 39. pp 265– 288.
  • Charitou, A., Lambertides, N and TheodoulouG ,. (2010). The Effect of Past Eearnings and Dividend Patterns on the Information Content of Dividends When Earnings Are Reduced, A Journal of Accounting Finance and Business Studies, ABACUS, 46 (2): 153-187.
  • Dawd, I. and Charfeddine, L. (2019) ‘Effect of aggregate, mandatory and voluntary disclosure on firm performance in a developing market: the case of Kuwait’, Int. J. Accounting, Auditing and Performance Evaluation, Vol. 15, No. 1, pp.31–56.
  • Fosu, s. (2013). Capital structure, product market competition and firm performance: evidence from South Africa. The Quarterly Review of Economics and Finance,53, 140-151.
  • Givoly, D., and C. Hayn. 2000. The changing time-series properties of earnings, cash flows and accruals: Has financial reporting become more conservative? Journal of Accounting & Economics 29 (3) (Jun): 287.
  • Hope, O., Hu, D. & Lu, H. (2014).The Benefits of Specific Risk-Factor Disclosures, Rotman School of Management, Working Paper.
  • Hope, O., Thomas, W.B., 2008. Managerial empire building and firm disclosure.
  • Iatridis, G. (2011). Accounting disclosures, accounting quality and conditional and unconditional conservatism. International Review of Financial Analysis, 20(2), 88-102.
  • Keller, G., & Warrack, B. (2003). Statistics for management and economics (6th ed.). Pacific Grove, CA: Duxbury Press.
  • Kravet, T., & Muslu, V. (2013).Textual Risk Disclosures and Investors’ Risk Perceptions, Review of Accounting Studies, 18, 1088~1122.
  • Kubick, T, R., Lynch, D, P., Mayberry, M, A & Omer, T, C. (2015). Product Market Power and Tax Avoidance: Market Leaders, Mimicking Strategies, and Stock Returns, THE ACCOUNTING REVIEW, Vol. 90, No. 2, pp. 675–702.
  • Lai, S. M., Liu, C. L., & Chen, S. S. (2020). Internal Control Quality and Investment Efficiency. Accounting Horizons.
  • Li, Y., He, J., Xiao, M. (2019). Risk Disclosure in Annual Reports and Corporate Investment Efficiency, International Review of Economics and Finance, 112(3), pp 522-558.
  • Linsley, P. & Shrives, P. (2006). Risk reporting: A study of risk disclosures in the annual reports of UK companies. The British Accounting Review, 38(4), 387-404.
  • Rezaee, Z., & Tuo, L. (2017). Voluntary disclosure of non-financial information and its association with sustainability performance. Advances in Accounting, 39, 47–59. doi:10.1016/j.adiac.2017.08.001
  • Rodriguez Domínguez, L. & Noguera Gámez, L. C. (2014). Corporate reporting on risks: Evidence from Spanish companies. Revista de Contabilidad, 17(2), 116-129.
  • Slovic, P., Fischhoff, B., & Lichtenstein, S.(1981).Facts and Fears, Social Perception of Risk, Advances in Consumer Research, 8(1), 497~502.
  • Smith, Kevin, Risk Disclosure, Liquidity, and Investment Efficiency (June 12, 2019). Stanford University Graduate School of Business Research Paper No. 19-8. Available at http://dx.doi.org/10.2139/ssrn.3282057
  • Verrecchia, R. E., Discretionary disclosure, Journal of Accounting and Economics, Volume 5, 1983, Pages 179-194, ISSN 0165-4101, https://doi.org/10.1016/0165 4101(83)90011-3.
  • Vourvachis, P. (2007). On the use of content analysis (CA) in corporate social reporting (CSR): Revisiting the debate on the units of analysis and the ways to define them. British Accounting Association Annual Conference, Egham, England.
  • Yanqiong Li, Jie He, Min Xiao, (2018) Risk Disclosure in Annual Reports and Corporate Investment Efficiency, International Review of Economics and Finance,
    doi: 10.1016/j.iref.2018.08.021.