Does Securities Commission Oversight Reduce the Complexity of Financial Reporting?

Spanish Accounting Review, Vol 23 No 1, pp 1-17, doi: 10.6018/rcsar.389791, 2020

Posted: 10 Jan 2020

See all articles by Reza Hesarzadeh

Reza Hesarzadeh

Ferdowsi University of Mashhad

Javad RajabAlizadeh

Ferdowsi University of Mashhad (FUM)

Date Written: January 1, 2020

Abstract

We investigate whether securities commission oversight reduces the complexity of financial reporting (complexity). To measure the securities commission oversight, we use comment letters from securities commission of Iran. Further, to measure the complexity, we employ the Fog index. Using a difference-in-differences design with a propensity score matching approach, we find that the securities commission oversight reduces the complexity. Furthermore, we document that the impact of securities commission oversight on the complexity is stronger for firms with higher corporate governance quality. In addition, we document that the impact of securities commission oversight on the complexity (1) is not limited to one year and persists through at least two years later; and (2) is not higher for firms that receive more comment letters. We further document the spillover effect of securities commission oversight, in the sense that firms not receiving any comment letter reduce their complexity if the securities commission has commented on the industry leader or a close rival. Collectively, this paper, on the one hand, provides related evidence for the international debate on whether securities commissions could provide beneficial effects; and on the other hand, contributes to the literature on the complexity and its reducing factors that are among the most important issues in the context of international financial reporting.

Keywords: Securities commissions, Complexity, Opportunistic managerial behavior, Information-processing costs, Spillover effect, Information obfuscation

JEL Classification: G32, M42; M48

Suggested Citation

Hesarzadeh, Reza and RajabAlizadeh, Javad, Does Securities Commission Oversight Reduce the Complexity of Financial Reporting? (January 1, 2020). Spanish Accounting Review, Vol 23 No 1, pp 1-17, doi: 10.6018/rcsar.389791, 2020, Available at SSRN: https://ssrn.com/abstract=3455365

Reza Hesarzadeh (Contact Author)

Ferdowsi University of Mashhad ( email )

Mashhad, 9177948974
Iran

HOME PAGE: http://Hesarzadeh.profcms.um.ac.ir/

Javad RajabAlizadeh

Ferdowsi University of Mashhad (FUM) ( email )

P.O. Box 91775-1163
Mashhad
Iran

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