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This study empirically examines the quality of corporate disclosure with special reference to its qualitative attribute of `Timeliness'. It is based on a sample of 288 and 292 companies drawn from BT-500 companies (November, 2004 issue) for the financial years 2004-05 and 2005-06. Auditor's report has been used as a surrogate for timeliness. PROWESS, the database of Center for Monitoring Indian Economy (CMIE) has been used as a major source of data collection. SPSS 10.05 has been used as a statistical tool to arrive at results. Descriptive statistics indicate that almost all the companies in the sample report within 180 days (as set by regulatory authorities in India) during both the years of the study. Non-parametric test namely Spearman's rank correlation has been used to check the association of the independent variables with reporting lag. Backward stepwise regression analysis revealed that the corporate attributes namely, size of a firm, nature of industry and audit specific attributes namely, audit firm size and audit complexity significantly influence the reporting lag of selected companies in India during both the years of study. Rest of the variables namely, profitability of a firm, listing category, residential status, age, leverage and audit fee could not significantly influence the reporting lag during both the years of the study.
American Accounting Association (AAA, 1955 and 1957) recognized `timeliness' as one of the qualitative attributes of the corporate disclosure for the first time. Subsequently, the Accounting Principles Board (1970), American Institute of Certified Public Accountants (AICPA)(1973) and Financial Accounting Standards Board (FASB) (1980) in the US, the Institute of Chartered Accountants of Canada (ICAC) and the Institute of Chartered Accountants of England and Wales (ICAEW) followed it. Thereafter, users of corporate information (decision makers) such as, financial analysts, professional bodies, investors, managers, academicians, stakeholders and regulatory authorities took it as an important characteristic of financial accounting information.
Through out the world, market pressures demand firms to release faster and more frequently the financial disclosures for valuing securities and satisfying increasingly information needs of investors (Aubert, 2007, p. 2). The regulatory authorities worldwide issued principles of disclosure that require the corporate governance framework to make timely and accurate disclosures of all material information regarding the corporation. The US Securities and Exchange Commission directed listed companies to file their annual 10-K reports by a deadline. FASB (1980) in its Statement of Financial Accounting Concepts No. 2 remarked timeliness as an ancillary aspect of relevance. It states, "although timeliness alone will not make information relevant, information must be timely to be relevant. It must be available before it loses its ability to influence the decision makers" (Delaney et al., 1997, p. 24).
The OECD, 1999 code on corporate governance secured the interests of shareholders by giving them basic right to obtain relevant information from the corporations on timely and regular basis. In India, CII Code of Corporate Governance ,1998, clause 49 of listing agreement and Code of Conduct of Disclosure Policy, 2002 framed by Securities and Exchange Board of India (SEBI) emphasized on timely and frequently updated disclosure of shareholders information through company's communication media. The Committee for Investor Education and Protection in India is of the view that proper and timely disclosures are central to safeguard investor interests. The law should ensure a disclosure regime that compels companies to disclose material information on a continuous, timely and equitable basis. Information should be disclosed when it is still relevant to the market. The companies should, therefore, be made to disclose routine information on a periodic basis and price sensitive information on a continuous basis. |
