Foreign ownership and financial disclosure in Central and Eastern Europe
Keywords:
Foreign ownership, Multinational corporation ownership, Financial disclosure, Central and Eastern European countriesAbstract
It is recognized that multinational corporations (MNC) have played a significant role in the recent worldwide accounting reform. This study aims to explore and analyse the influence of foreign ownership and MNC on financial disclosure practices of listed companies from Central and Eastern European countries (CEE), as an evidence of their contribution to regional financial reporting development. Moreover, the opposite effect, the role of disclosure in attracting foreign investments is investigated. These associations were empirically tested through fixed effects panel analysis conducted for 2005-2015 period, in the context of partial IFRS adoption in CEE. It was found that foreign shareholders may determine a change in disclosure practices of their investees due to their monitoring tendencies and need of comparability of financial information. Furthermore, foreign corporate owners have to impose their own reporting policies which may diminish the extent of disclosure of foreign subsidiaries. On the other hand, foreign investors do not seem sensitive to individual items changes in reported information, these evidences raising questions regarding the purpose and impact of disclosure on financial markets. Questioning the importance of financial disclosure, this study may give a signal to standard-setters about reporting practices at regional level. Adding an original empirical contribution to reporting behaviour and corporate transparency literature by providing evidences from CEE countries, the present study invites to further research on reporting practices of companies with foreign ownership.
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Nashier, T., & Gupta, A. (2016). The Effect of Institutional Ownership on Firm Performance. IUP Journal of Corporate Governance, 15(3), 36-56.
Scaltrito, D. (2016). Voluntary disclosure in Italy. Firm-specific determinants an empirical analysis of Italian listed companies. EuroMed Journal of Business, 11(2), 272-303. doi:10.1108/EMJB-07-2015-0032
Thomsen, S., & Pedersen, T. (2000). Ownership structure and economic performance in the largest European companies. Strategic Management Journal, 689-705. DOI: 10.1002/(SICI)1097-0266(200006)21:6<689::AID-SMJ115>3.0.CO;2-Y
Wang, K., Sewon, O., & Claiborne, M. C. (2008). Determinants and consequences of voluntary disclosure in an emerging market: Evidence from China. Journal of International Accounting, Auditing and Taxation, 17(1), 14-30. doi:10.1016/j.intaccaudtax.2008.01.001
Xia, F., & Walker, G. (2014). How much does owner type matter for firm performance? Manufacturing firms in China 1998–2007. Strategic Management Journal, 36(4), 576-585. doi:10.1002/smj.2233
Zimmermann, J., & Werner, J.R. (2013). Regulating Capitalism? The Evolution of Transnational Accounting Governance, Hampshire: Palgrave Macmillan.
Alhazaimeh, A., Palaniappan, R., & Almsafir, M. (2014). The Impact of Corporate Governance and Ownership Structure on Voluntary Disclosure in Annual Reports among Listed Jordanian Companies. Procedia - Social and Behavioral Sciences, 129, 341 – 348. doi:10.1016/j.sbspro.2014.03.686
Barako, D.G., Hancock, P., & Izan, H.Y. (2006). Factors Influencing Voluntary Corporate Disclosure by Kenyan Companies. Corporate Governance: An International Review, 14(2), 107-125. doi:10.1111/j.1467-8683.2006.00491.x
Beuselinck, C., Blanco, B., & Garcia Lara, J.M. (2017). The Role of Foreign Shareholders in Disciplining Financial Reporting. Journal of Business Finance & Accounting, 44(5-6), 558–592. doi:10.1111/jbfa.12239
Beyer, A., Cohen, D.A., Lys, T.Z., & Walther, B.R. (2010). The financial reporting environment: Review of the recent literature, Journal of Accounting and Economics, 50, 296-343, doi:10.1016/j.jacceco.2010.10.003
Bokpin, G.A., & Isshaq,Z. (2009). Corporate governance, disclosure and foreign share ownership on the Ghana Stock Exchange. Managerial Auditing Journal, 24(7), 688-703. https://doi.org/10.1108/02686900910975387
Bradbury, M. (2011). Direct or Indirect Cash Flow Statements?. Australian Accounting Review, 21(2), 124-130. doi: 10.1111/j.1835-2561.2011.00130.x
Broberg, P., Tagesson, T., & Collin, S.-O. (2010). What explains variation in voluntary disclosure? A study of the annual reports of corporations listed on the Stockholm Stock Exchange. Journal of Management & Governance, 14(4), 351-377. doi:10.1007/s10997-009-9104-y
Chau, G., & Gray, S.J. (2010). Family ownership, board independence and voluntary disclosure: Evidence from Hong Kong. Journal of International Accounting, Auditing and Taxation, 19, 93–109. https://doi.org/10.1016/j.intaccaudtax.2010.07.002
Chen, C.S. (2016). The effect of mandatory disclosure requirements and disclosure types of auditor fees on earnings management: Evidence from Taiwan. Asia Pacific Management Review, 21, 181-195. http://dx.doi.org/10.1016/j.apmrv.2015.12.002
Chen, R., Ghoul, S.E., Guedhami, O., & Wang, H. (2017). Do state and foreign ownership affect investment efficiency? Evidence from privatizations. Journal of Corporate Finance, 2, 408–421. https://doi.org/10.1016/j.jcorpfin.2014.09.001
Chen, V.Z., Li, J., Shapiro, D.M. & Zhang, X. (2014). Ownership structure and innovation: An emerging market perspective. Asia Pacific Journal of Management, 31(1), 1-24. https://doi.org/10.1007/s10490-013-9357-5
Choi, S.B., Park, B.I., & Hong, P. (2012). Does Ownership Structure Matter for Firm Technological Innovation Performance? The Case of Korean Firms. Corporate Governance: An International Review, 20(3), 267-288. doi:10.1111/j.1467-8683.2012.00911.x
DeFond, M., Hu, X., Hung, M., & Li, S. (2011). The impact of mandatory IFRS adoption on foreign mutual fund ownership: The role of comparability. Journal of Accounting and Economics, 51, 240–258. doi:10.1016/j.jacceco.2011.02.001
Douma, S., George, R., & Kabir, R. (2006). Foreign and Domestic Ownership, Business Groups, and Firm Performance: Evidence from a Large Emerging Market. Strategic Management Journal, 27, 637-657. doi:10.1002/smj.535
Fang, V.W., Maffett, M., & Zhang, B. (2015). Foreign Institutional Ownership and the Global Convergence of Financial Reporting Practices. Journal of Accounting Research, 53(3), 593-631. doi:10.1111/1475-679X.12076
Guay, W., Samuels, D., & Taylor, D. (2016). Guiding through the Fog: Financial statement complexity and voluntary disclosure, Journal of Accounting and Economics, 62, 234–269. http://dx.doi.org/10.1016/j.jacceco.2016.09.001
Hansen, B., Miletkov, M.K., & Wintoki, M.B. (2015). Investor Protection and the Role of Firm-Level Financial Transparency in Attracting Foreign Investment. The Financial Review, 50, 393-434. doi:10.1111/fire.12072
Hoque, M., & Rakow, K.C. (2016). Do voluntary cash flow disclosures and forecasts matter to value of the firms?. Managerial Finance, 42(1), 3-12. doi:10.1108/MF-09-2015-0253
Hsu, M.-F., & Wang, K. (2014). The Level and Stability of Institutional Ownership and Firm Performance: Evidence from Taiwan. Emerging Markets Finance and Trade, 50(sup.2), 159-173. doi: 10.2753/REE1540-496X5002S211
Imam, M.O., & Malik, M. (2007). Firm Performance and Corporate Governance Through Ownership Structure: Evidence from Bangladesh Stock Market. International Review of Business Research Papers, 3(4), 88-110. http://ssrn.com/abstract=2256480
Jankensgård, H. (2018). Between a rock and a hard place: New evidence on the relationship between ownership and voluntary disclosure. International Review of Financial Analysis. 56. 281-291. https://doi.org/10.1016/j.irfa.2017.09.009
Khanna, T., Palepu, K.G., & Srinivasan, S. (2004). Disclosure Practices of Foreign Companies Interacting with US Markets. Journal of Accounting Research, 42(2), 475-508. doi:10.1111/j.1475-679X.2004.00146.x
Leung, E., & Verriest, A. (2015). The Impact of IFRS 8 on Geographical Segment Information. Journal of Business Finance & Accounting, 42(3-4), 273-309. doi:10.1111/jbfa.12103
Mangena, M., & Tauringana, V. (2007). Disclosure, Corporate Governance and Foreign Share Ownership on the Zimbabwe Stock Exchange. Journal of International Financial Management and Accounting, 18(2), 53-85. doi:10.1111/j.1467-646X.2007.01008.x
Nakano, M., & Nguyen, P. (2013). Foreign ownership and firm performance: evidence from Japan's electronics industry. Applied Financial Economics, 23(1), 41-50. http://dx.doi.org/10.1080/09603107.2012.705425
Nashier, T., & Gupta, A. (2016). The Effect of Institutional Ownership on Firm Performance. IUP Journal of Corporate Governance, 15(3), 36-56.
Scaltrito, D. (2016). Voluntary disclosure in Italy. Firm-specific determinants an empirical analysis of Italian listed companies. EuroMed Journal of Business, 11(2), 272-303. doi:10.1108/EMJB-07-2015-0032
Thomsen, S., & Pedersen, T. (2000). Ownership structure and economic performance in the largest European companies. Strategic Management Journal, 689-705. DOI: 10.1002/(SICI)1097-0266(200006)21:6<689::AID-SMJ115>3.0.CO;2-Y
Wang, K., Sewon, O., & Claiborne, M. C. (2008). Determinants and consequences of voluntary disclosure in an emerging market: Evidence from China. Journal of International Accounting, Auditing and Taxation, 17(1), 14-30. doi:10.1016/j.intaccaudtax.2008.01.001
Xia, F., & Walker, G. (2014). How much does owner type matter for firm performance? Manufacturing firms in China 1998–2007. Strategic Management Journal, 36(4), 576-585. doi:10.1002/smj.2233
Zimmermann, J., & Werner, J.R. (2013). Regulating Capitalism? The Evolution of Transnational Accounting Governance, Hampshire: Palgrave Macmillan.
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2018-08-01
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Foreign ownership and financial disclosure in Central and Eastern Europe. (2018). Timisoara Journal of Economics and Business, 10(2), 151-168. https://www.tjeb.ro/index.php/tjeb/article/view/244
