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Financial Reporting Quality in Emerging Economies

Empirical Evidence from Brazil and South Africa


Gregor Hagemann

Contrary to their increasingly important role in the global economy, little is known so far about the financial reporting practices in emerging economies. This study therefore analyses the financial reporting practices of listed firms in Brazil and South Africa. It also investigates the determinants of financial reporting quality and its effect on information asymmetries. In addition, the author compares the results for the two emerging economies to those for Germany representing a developed economy. The empirical findings have several implications for researchers and lecturers as well as for practitioners, such as preparers and users of financial reports, legislators, standard setters and auditors.

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6 Empirical results


6   Empirical results

After the description of the empirical field including the sample selection as well as the presentation of the research methodology of the different studies in chapter five, this chapter presents the empirical results of the investigations. In particular, the research hypotheses, which have been developed in chapter four, are tested throughout this chapter. The structure of the empirical results follows this study’s research objectives. First, section 6.1 describes financial reporting practices by presenting the descriptive results for each of the three measures of FRQ. Second, section 6.2 presents the results of the determinants study. Third, the results of the capital market study are presented in section 6.3. Finally, section 6.4 links and discusses the results of the three studies.

6.1   Financial reporting practice

After section 6.1.1 presents the results of the accruals-based proxies, section 6.1.2 shows the results of the annual report investigation including the analysis of the annual report size as well as the results of the content analysis on the basis of the disclosure index. Moreover, the findings of the readability analysis are presented in section 6.1.3. Section 6.1.4 compares the results of the three FRQ measures on the basis of correlation analyses and section 6.1.5 evaluates the analyzed financial reporting practice critically.

6.1.1   Accruals-based earnings management

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