This paper addresses the role of principles-based accounting standards as a potential mechanism for reducing firms' time delay of annual reporting disclosure while improving the timeliness of accounting information. The paper also contributes to the existing literature by addressing the mediating effects of the financial reporting complexity and the audit workload on the link between principles-based accounting standards and the time delay of annual reporting disclosure.
The focus is placed on an unbalanced panel of 20,943 samples over the period of 2007–2017.
The results show that the more principles-based the accounting standards are, the lower the time delay of annual reporting disclosure is, and the timelier the disclosure of accounting information is. The relationship between the two is more significant especially in the first two months after the end of the fiscal year. The findings are all robust after controlling for a series of sensitivity checks and endogenous concerns. From the mediating effect results, the authors find that principles-based accounting standards decrease the financial reporting complexity and the audit workload which in turn can help lower time delay of annual reporting disclosure. In addition, the negative effect of principles-based accounting standards on the time delay of annual reporting disclosure is more significant in the case that the company has “good news” including with no losses and receiving the standard auditing opinions. The results confirm the law of “good news announces early, bad news announces late.” Furthermore, the moderating effect results show that the higher the economic policy uncertainty index and the legal environment index, the lower the benefit of principles-based accounting standards to the timeliness of annual reports. The results of the economic consequences of timeliness suggest that the timely disclosure of accounting reporting will bring greater market reaction and contain more information, and the information of companies that disclose annual reports timely are more transparent.
This paper studies the impact of accounting standards on the timeliness of annual report disclosure, which enriches the literature in the field of macro policies and micro-enterprise behaviors.
The authors would like to thank the National Natural Science Foundation of China (Grant 71828203; 71371155), Humanity and Social Science Research Program Foundation of the Ministry of Education of China (Grant 19XJA630006) for their financial support. The authors would like to thank the editor-in-chief, the associate editor and anonymous reviewers for their help in this paper.
Conflict of interest statement: No conflict of interest exits in the submission of this manuscript, and manuscript is approved by all authors for publication. The author would like to declare that the work described was original research that has not been published previously, and not under consideration for publication elsewhere, in whole or in part. All the authors listed have approved the manuscript that is enclosed.
Song, F. and Zhou, J. (2021), "Principles-based accounting standards and the timeliness of annual reports: evidence from China", Asian Review of Accounting, Vol. 29 No. 3, pp. 399-442. https://doi.org/10.1108/ARA-07-2021-0120
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