The Relationship between the Financial Reporting Frequency and the Value Relevance of Accounting Information: Does the Financial Reporting Lag Matter? “An Egyptian Evidence”

Abstract

Purpose – This research aims to study and investigate the relationship between the financial reporting frequency, in terms of the quarter, semi-annual, and annual reporting, and the value relevance of accounting information, as measured through the extent of the reflection of the accounting information related to the book value of equity and earnings per share in stock prices. In addition, it examines the influence of the financial reporting lag, as a moderating variable, on this relationship. Design/Methodology – Multiple regressions are used to test research hypotheses using a sample of 90 non-financial firms listed on the Egyptian Stock Exchange (EGX) during 2016 – 2019. The sample is divided into 3 samples, according to the financial reporting frequency, including 288 firm-quarter observations, 331 firm-semiannual observations, totaling 619 firm-interim observations, and 335 firm-year observations. The sample is selected based on some conditions and is constrained by the availability of data. Findings – The researcher concludes that the more frequent reporting in terms of publishing interim financial statements, enhances the value relevance of the accounting information. That is, results indicate that the accounting information provided by the interim financial statements has more value relevance than that provided by the annual financial statements. However, the longer the period till issuing the interim/annual financial statements, the more likely the accounting information loses its relevance, especially that provided periodically. Unexpectedly, results revealed that the accounting information provided by the semi-annual financial statements has a higher value relevance than that quarterly provided, however, both are similarly affected by the financial reporting lag. These findings are robust since the results of the sensitivity analyses, using different methods in measuring the effect of the financial reporting lag, support the results of the basic analysis. -Originality/value – To the best of the researcher’s knowledge, there is relatively limited evidence on the timeliness of the interim financial reporting, as measured by the frequency of reporting and the financial reporting lag, and its association with the value relevance of the accounting information in the Egyptian context. Furthermore, the findings of this research have some implications for researchers, financial statements’ preparers and users, and regulatory bodies who seek to enhance the quality of the financial statements in emerging economies.