Transformations  in
Business & Economics

FINANCIAL REPORTING QUALITY IN CHINA: A PERSPECTIVE OF QUALITATIVE CHARACTERISTICS
Xiaosong Zheng, Jiao Chen

ABSTRACT. In the literature, a lot of research focuses on a particular qualitative characteristic thus cannot evaluate financial report quality comprehensively. Some current researches do apply several qualitative characteristics to assess financial reporting quality but in China very few studies take this approach. Based on the Chinese market, this paper carefully chooses five qualitative characteristics (faithful representation, relevance, timeliness, comparability, understandability) and corresponding secondary indicators to study financial reporting quality. By using analytic hierarchy process and fuzzy evaluation method, the paper builds a qualitative financial reporting quality evaluation system. Finally, in this research 140 A-shares listed companies in Shanghai Stock Exchange in 2015 were selected to makes a multiple regression analysis to confirm effectiveness of the evaluation system. The results show that industry type, area and Rate of Return (ROE) on common stockholders' equity have a significant impact on financial reporting quality, while whether the comprehensive ability of external audit has a significant influence on financial reporting quality in China needs to be further studied .

KEYWORDS:  financial reporting, quality, qualitative characteristics, assessment, China.

JEL classification:  M40, C30.