Economic Entities Transparency: Current State and Trends

Transparency in reporting: systematic literature review Author: Ana Maria Parascan (Obreja)

Introduction The main purpose of accounting is to provide stakeholders accurate information about the financial situation of entities and a transparent reporting reduces information asymmetry between the entity and the market. Financial reporting is an important part of a company's capital market communication and decision making by investors. The European Union implemented International Financial Reporting Standards (IFRS) as mandatory for listed companies in 2005 to provide investors and creditors with comparable, transparent and standardized financial information.

The aim of this study is to identify the current state of knowledge on transparency in the reporting of economic entities

Literature review The International Monetary Fund defines accounting transparency as a process by which information about an entity's conditions, decisions and actions is accessible, visible and understandable ("Draft Manual on Fiscal Transparency", 1998). PricewaterhouseCoopers documents that accounting opacity refers to the lack of clear, accurate, formal and widely accepted practices regarding accounting rules and procedures (Barth, J. R., Hall, T. W., and Kurtzman, J., 2001) The U.S. Securities and Exchange Commission (SEC) explains corporate accounting transparency as the degree of understandability, completeness, and reliability that enables an efficient market system and rational decision making. Transparency and disclosure is the framework used to direct and regulate economic entities (Alsalim, M.; Amin, H.; Youssef, A., 2018)

Similar SLR studies Identification of systematic literature review articles on the topic of transparency was done by searching the Scopus and Web of Science databases with the keywords "Systematic Literature Review" and "transparency" or "disclosure from 2020 to March 2023 to find similar papers. 10 SLR articles were published during this period. The topic of transparency has been investigated in areas such as accounting (Abed, et al., 2022; Ariffin et al., 2021; Huang et al., 2021; Ortega-Rodr guez et al., 2020), management (Ibrahim et al., 2022; Mbithi et al., 2022; Garc a-S nchez, 2021; Tasnia et al., 2021; Zarzycka et al., 2021) and finance (Shoeb et al., 2022). Studies have approached different forms of transparency: transparency of sustainability), transparency of non-profit organizations, non-financial transparency (corporate risk disclosure, voluntary disclosure), financial transparency (effects on innovation, effects and reasons for applying creative accounting). The accounting approach to transparency in corporate reporting has not been the subject of any recent review, which justifies this study. This study aims to answer the research question: What are the research trends on the topic of transparency in reporting?

Method PRISMA (Preferred Reporting Items for Systematic Reviews and Meta- Analyses) method related to systematic review techniques and meta-analyses (Page, McKenzie, Bossuyt, & al., 2021). PRISMA method requires the selection of literature in three steps: identification, selection, inclusion. I searched two databases, Web of Science (WoS) and Scopus.

Selection criteria The selection criteria include research area, language of publication, geographical area, publication period and type of documents and literature used Criteria Subject area Inclusion Exclusion The others Business Administration, Management, Accounting, Economics, Econometrics, Finance The language of publication English Others The geographical area The period of publication Whole world - From 1987 to 31 March 2023 Before 1987 Type of document Articles, review articles, original article, published in journal or conference volumes Books, book chapters, conference review, notes, short survey Type of literature Empirical studies Systematic literature review

Selection process Identification Records identified though database searching (n=318) Scopus (n=171) WoS (n=147) Removed according to the selection criteria (n=95) Records screened (n=223) Scopus (n=108) WoS (n=115) Removed duplicates (n=48) Screening Records excluded (n=51) SLR articles (n=13) Inadequate results (n=38) Reviewed documents based on title, abstract and keywords (n=175) Full text articles assessed for eligibility (n=124) Unavailable articles (n=21) Studies includes in review Included Articles included though retroactive search (n=22) (n=125)

Findings A descriptive analysis of the articles (year of publication, authors' countries, most relevant sources/journals and most prolific authors, theoretical foundations used) A content analysis of articles grouped into the following topics: transparency in financial reporting, transparency in non-financial reporting, impact of audit and corporate governance on entities' disclosures.

Year of publication 20 18 16 14 12 10 8 6 4 2 0 1997 2000 2001 2002 2003 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Authors' countries 90 Total 83 80 70 60 50 40 29 27 30 24 18 20 16 14 11 10 9 9 8 8 10 4 4 4 4 4 4 4 3 3 3 2 2 2 2 2 2 2 2 2 2 2 0

Most relevant sources/journals JOURNAL OF ACCOUNTING RESEARCH 11 ACCOUNTING REVIEW 7 JOURNAL OF ACCOUNTING AND ECONOMICS 6 REVIEW OF ACCOUNTING STUDIES 3 CONTEMPORARY ACCOUNTING RESEARCH 3 3 ASIAN REVIEW OF ACCOUNTING BORSA ISTANBUL REVIEW 3 EUROPEAN ACCOUNTING REVIEW 3 BRITISH ACCOUNTING REVIEW 3 ABACUS-A JOURNAL OF ACCOUNTING FINANCE AND BUSINESS 3 JOURNAL OF INTELLECTUAL CAPITAL 3 INTERNATIONAL REVIEW OF FINANCIAL ANALYSIS 3 JOURNAL OF POLICY MODELING 2 INTERNATIONAL JOURNAL OF AUDITING 2 JOURNAL OF MULTINATIONAL FINANCIAL MANAGEMENT 2 REVISTA CONTABILIDADE E FINANCAS 2 2 JOURNAL OF FINANCIAL REPORTING AND ACCOUNTING ACCOUNTING AND BUSINESS RESEARCH 2 JOURNAL OF CONTEMPORARY ACCOUNTING & ECONOMICS 2 INTERNATIONAL JOURNAL OF BUSINESS AND SOCIETY 2 JOURNAL OF ASIAN FINANCE ECONOMICS AND BUSINESS 2 INTERNATIONAL JOURNAL OF ACCOUNTING 2 JOURNAL OF APPLIED ACCOUNTING RESEARCH 2 RESEARCH IN INTERNATIONAL BUSINESS AND FINANCE 2 JOURNAL OF ACCOUNTING AND PUBLIC POLICY 2 0 2 4 6 8 10 12

Most prolific authors Barth, M. E. Landsman, W. R. Hussainey, K. Shivakumar, L Sagliaschi, U Rezaee, Z. Rahman, AA Power D.M. Pereira, R. Percy M. Pavlopoulos, A Morris, RD Magnis, C Beaver, W. H. Kothari, S. P. Khurana, I. K. Iatridis, GE 0 1 2 3 4 5 6

Content analysis Accounting quality information necessary to achieve financial transparency Factors Operational Definitions Researchers Park et al., 2004; Choi, 2004;Yoo et al., 2005; FMI, 2007; BCBS, 1998; Han et al., 2000; Schilder, 2002; Weil, 2002 Accounting information should be provided with sufficient frequency and timeliness.. Accounting information must reflect the economic substance of events and transactions and be verifiable, neutral, prudent, and complete in all material respects Timeliness Choi, 2004 ;Yoo et al., 2005; FMI, 2007; BCBS, 1998; Han et al., 2000; Williams et al., 2006; Elorrieta, 2002 Completeness FMI, 2007; Han et al., 2000; Williams et al., 2006 Accounting information needs to be generated according to consistent accounting standards. Consistency Choi, 2004; FMI, 2007; BCBS, 1998; Han et al., 2000; Schilder, 2002; Weil, 2002 Accounting information must be relevant to the decision-making needs of users by helping them assess the expected risks and future performance and position. Relevance Yoo et al., 2005; Han ial ii, 2000; Zhu, 2002; Maines et al., 2000; Hodge et al., 2002; Dam odaran, 2002 The format of accounting information and placement of data such as footnotes help users understand the information. Understandability Influence of IFRS adoption on transparency (increased earnings, reduced information asymmetry, higher cost of debt);

Content analysis Voluntary disclosure transparency; Increased levels of corporate disclosure lead to lower cost of equity capital, increased investment; Corporate governance predictor of financial and non-financial reporting transparency; Voluntary disclosure of corporate governance has a significant positive impact on share price; Auditing influences the quality of information (Firms that have Audit Committees make better quality disclosures. Larger firms with minority shareholders have a higher volume of disclosures, while Audit Committee qualification does not increase the volume of disclosures), institutional monitoring reduces opportunistic behaviour of managers. the fundamental dimension of the non-financial

Limits and future directions Limits book chapters are not covered in the review to ensure external validity a review of the measurement techniques of transparency wasn t presented in our study Future direction An empirical study to assess the impact of corporate governance and audit on transparency, using qualitative and quantitative methods

Conclusion This study is designed to provide a comprehensive and up-to-date literature review of research trends on the topic of transparency. Corporate managers can find ways to report transparently. Regulators should continue to monitor the findings and discussions of researchers on transparency of information in order to use them in the regulatory process.

Thank you for your attention!