Transformations  in
Business & Economics

A CROSS-COUNTRY STUDY OF FINANCIAL REPORTING QUALITY: INSIGHTS AND PRACTICAL IMPLICATIONS FOR 13 "ONE BELT ONE ROAD" COUNTRIES
Xiaosong Zheng, Shuqin Zhou, Yi An

ABSTRACT. Financial reporting quality (FRQ) has been examined and discussed at different levels in the literature. However, much of the research is simply at a firm level or on case studies. This research takes a cross-country approach to compare FRQ in 13 One Belt One Road (OBOR) countries. First, an innovative model is built which measures FRQ at the country level from the perspectives of both financial information and non-financial information which are represented by five indicators. The research then applies analytic hierarchy process (AHP) to allocate different weight coefficients for the five indicators to measure FRQ. It is found that FRQ is positively related to a country's legal origin, GDP per capital, democracy, law enforcement, size and profitability of listed firms. Among the 13 sample countries, from 2013 to 2017, their ranking of FRQ from high to low is: New Zealand, South Africa, Singapore, South Korea, Thailand, Malaysia, Russia, Israel, Pakistan, Poland, Turkey, Philippines, and Indonesia. The research confirms the reliability and effectiveness of the constructed FRQ model .

KEYWORDS:  FRQ, AHP, quality, earnings management, OBOR.

JEL classification:  M40, C30.