An Accounting Model to Measure the Effect of Information Transparency on Attributes of Earnings Quality (An Applied Study)

Abstract

This research aimed at investigating the effect of information transparency on accruals quality, earnings persistence, predictability and smoothness as attributes of earnings quality. Thus, the objectives of this research were: (1) Measure the impact of information transparency on accruals quality (2) Measure the impact of information transparency on earnings persistence (3) Measure the impact of information transparency on earnings predictability (4) Measure the impact of information transparency on earnings smoothness In order to achieve these objectives, a transparency index was developed by combining previous transparency indices used in previous studies and eliminating any repeated or irrelevant aspect which finally led to an index of 165 questions. The idea of this index was based on the firm disclosure for each piece of information represented as a question in the index or not. The research was applied on a sample of thirty firms of different sectors, the common factor between these firms that they are listed in EGX 30. The reason for choosing EGX 30 is that the requirements for a company to be included in this index, ensures market participants that the index constituents truly represent actively traded companies. The research was organized into five chapters as follows: Chapter One: General Framework of the Research This chapter presented the introduction, research problem, question, objectives, hypotheses, and brief of the methodology, variables and model used, as well as research limitations and research outline. Chapter Two: Literature Review This chapter presented the previous studies conducted on the research variables or related to the research topic. Each study was displayed in terms of its objectives, methodology used, and results Chapter Three: Theoretical Background This chapter presented for each of the main notions of this research its definitions, interpretations factors that affect it, different models used in previous studies in measuring each variable and finally the contribution of this research to literature. Chapter Four: Research Methodology and Data Analysis This chapter was divided into two sections. The first one explained the methodology of this research in details in terms of data Population sources of data collection, how the information transparency index is constructed and the models used to measure each dependent variable as well as the models used to test the research hypotheses. The second section displayed the findings of statistical analysis and its interpretations.