Journal Press India^®

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Financial reporting is the process of preparing and distributing financial information to users of such information in various forms. In an era of increasingly stringent financial reporting requirements, timely and accurate financial information must be deliverable to anyone, anywhere, at anytime. The primary premise of financial reporting is to provide high-quality financial reporting information concerning economic entities, primarily financial in nature, useful for economic decision making. Providing high quality financial reporting information is important because it will positively influence capital providers and other stakeholders in making investment, credit, and similar resource allocation decisions enhancing overall market efficiency. The paper has scratched many of the indicators from the company’s financial reports to know the status of the corporate financial reporting in Indian scenario. The study considers quality of financial reporting as explained variable and sixteen most influencing indicators of quality such as calculation of net profit, return on average net worth, Employees Stock Option Scheme (Sweat Capital), market capitalization; monthly returns etc as explanatory variables. The objective of the paper is to explore answer to the research question “Are all these indicators reliable to measure the quality of corporate financial reporting in India?” To measure it, Cronbach Coefficient Alpha of Reliability & Item Analysis is used to identify reliable measurement, to improve existing one, and to evaluate the reliability of indicators already in use. The analysis covered the data series of ten financial years of five companies from 2001-02 to 2009-10 of whose annual reports available on their websites and also registered on SEBI, are randomly selected. The paper ends with an outcome on the reliable quality indicators of financial reporting and highlighting the limitations of the study.

Keywords

Financial reporting, Quality Indicators, Dummy variables, Reliability analysis, Cronbach alpha JEL Classification Codes: C3, M41

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