The Role of Accounting Disclosure in Explaining the Intrinsic Market Value of Corporations' Shares Trading in Amman Stock Exchange
affiliation not provided to SSRN
March 1, 2005
The aim of this study was as follows: 1. To explain the requirements of accounting disclosure for corporations whose shares are traded in the stock exchange and to identify its importance for financial information users. 2. To exhibit the reliability and adequacy of financial information available for investors to support their investment decisions. 3. To show to what extent financial information users, particularly investors, depend on different mechanisms adopted in evaluating shares in their investment decisions. 4. To show the factors those affect the decline and rise of market value of the shares of shareholding companies in view of unavailability of new information about companies' performance. 5. To show the extent to which companies comply with accounting disclosure requirements. 6. To state the reasons and obstacles that impede companies compliance with accounting disclosure requirements. 7. To show the role of controlling authorities (bodies) in activating the accounting disclosure process and protecting investors' interests. 8. To show the effect of the improvement of accounting disclosure level on investors' decisions.
To achieve these objectives the researcher developed a questionnaire for this purpose and distributed it on the study sample, which represents public shareholding companies sector, licensed financial brokers sector and investors sector in Amman Stock Exchange. The sample included: (35) public shareholding companies trading in Amman Stock Exchange, (23) licensed financial brokers and (27) investors in Amman Stock Exchange. As a result of analysis of questionnaire items the researcher reached the following results: 1. The importance of financial information disclosed increases with financial brokers more than with the other two sectors followed by investors and public shareholding companies. In general, all study sample groups pay much attention to accounting disclosure requirements in financial information. 2. All study sample groups consider that financial information disclosed by public shareholding companies are appropriate and adequate to highlight the intrinsic market value of shares and pay much attention to financial information, especially those published by the Securities Commission about companies' performance, followed by the financial information, which companies publish through their annual financial reports considering that the financial information published in the newspapers and magazines are the less important information sources. 3. All study sample groups depend to a large extent in their investment decisions on different mechanisms adopted in shares evaluation by gathering the large amount possible of economic and financial information and conducting some analyses for shares prices. 4. All study sample groups consider that the unavailability of information on companies' performance affects the determination of their prices and that shares are not shown with the intrinsic value and that it adversely affects their shares in the Stock Exchange. 5. Public shareholding companies comply with disclosure requirements imposed under international accounting standards, international audit standards and disclosure regulations issued by the Securities Commission. This compliance increases in case the company has a high reputation in the Stock Exchange, followed by the companies whose accounts are audited by large and renowned audit firms. 6. There are several factors that weaken the accounting disclosure process by shareholding companies. The most important of these factors are the lack of professional cadres able to meet disclosure requirements and the companies' fear of the outflow of information which might affect their competition status. 7. All study sample groups consider that different controlling authorities play a role in activating the accounting disclosure process and protecting investor's interests leaving the greater role to the Securities Commission, the Companies Controller and finally the external auditor. 8. All study sample groups consider that improvement of accounting disclosure level has an effect in showing the intrinsic value of the price of shares traded in the Stock Market and subsequently rationalizing their investment decisions.
Note: Downloadable document is in Arabic.
Number of Pages in PDF File: 162
Keywords: Accounting Disclosure, Intrinsic Market Value, Amman Stock Exchange, Jordan, Yahya Alqudah, Amman Arab University
JEL Classification: M41, E44working papers series
Date posted: March 1, 2012
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