Quality of Corporate Financial Reporting:
A Longitudinal Study of the Listed Companies in Bangladesh

Abstract

The current study investigates the quality of corporate reporting practices of the listed companies in Bangladesh. It measure quality through the quality of mandatory reporting, the quality of voluntary reporting and the timeliness of reporting by using panel data from 2004 to 2010. The final sample consists of 123 companies with 861 firm year observations listed in the Dhaka Stock Exchange, Bangladesh.

In order to measure the mandatory reporting quality the current study determines the extent as well as the determinants of corporate mandatory disclosure in total and its categories. This study uses seven self constructed checklists (items ranging from 148 to 179) to measure the extent of mandatory reporting. The study presents average mandatory reporting at 76.42%. These results also indicate that mandatory reporting has significant positive association with firm size, firm profitability (ROA), and multinational parents, while it has significant negative association with ownerships. However, there is non-significant relationship between mandatory reporting and firm profitability (ROE), audit firm size and industry category.

For voluntary reporting both a weighted and unweighted index has been used. A self constructed voluntary reporting checklist consisting of 97 items has been prepared. A questionnaire survey has been conducted to determine the weight. A low level of voluntary reporting has been observed over the seven years, standing at 28.56%.There is a gradual increase in the average score. A significant positive relationship has been observed between voluntary reporting and firm size, firm liquidity, percentage of independent director and board structure, while there is a significant negative association with market categories, company age and number of independent director. However, there is a non significant relationship of voluntary reporting with audit committee, and board size.

The study determines the extent of timeliness through calculating audit lag, preliminary lag and total reporting lag. It also examines the determinants of timeliness for all three categories. Empirical finding indicate that the sample companies need about 110 days to complete the audit process whereas average reporting lag is 170 days for the entire period. Finally total reporting lag time has a significant positive association with earning, financial condition, company's age and industry classification, while it has significant negative association with firm size and audit firm size. However, audit opinion type has weak or no association with total reporting lag time.