Creditors' and Shareholders' Reporting Demands in Public Versus Private Firms: Evidence from Europe

63 Pages Posted: 3 Mar 2004 Last revised: 18 Sep 2009

See all articles by Erik Peek

Erik Peek

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM); Erasmus Research Institute of Management (ERIM)

Rick Cuijpers

University of Maastricht - Department of Accounting and Information Management

Willem Buijink

Tilburg University - Department of Accounting & Accountancy

Date Written: January 15, 2009

Abstract

In this study we investigate whether the importance of accounting information in contracting and communication with shareholders and creditors affects earnings timeliness in publicly disclosed general purpose financial statements. To operationalize the relationship between timeliness demands and the importance of accounting information to shareholders and creditors, we compare the (asymmetry in) earnings timeliness of public firms with that of private firms. We attribute public versus private firm differences in timeliness to shareholders’ demands when a country’s institutions provide strong investor protection. Similarly, we attribute these differences to creditors’ demands when the institutions provide strong creditor protection. Our analysis of public and private firms in thirteen Western European countries suggests that creditors and shareholders have different timeliness demands. In particular, we find that the public versus private firm difference in asymmetric timeliness is not associated with a country’s degree of investor protection but positively associated with a country’s degree of creditor protection. The results further suggest that shareholders demand symmetric rather than asymmetric timeliness. An important implication of our study is that general purpose financial statements are responsive to creditors’ reporting demands, which contrasts with the idea that these - primarily private - creditors would use special purpose reports.

Keywords: creditors, shareholders, earnings timeliness, institutions

JEL Classification: M41, G32, K22

Suggested Citation

Peek, Erik and Cuijpers, Rick and Buijink, Willem F.J., Creditors' and Shareholders' Reporting Demands in Public Versus Private Firms: Evidence from Europe (January 15, 2009). AAA 2007 Financial Accounting & Reporting Section (FARS) Meeting Papers; Contemporary Accounting Research, Forthcoming. Available at SSRN: https://ssrn.com/abstract=511822 or http://dx.doi.org/10.2139/ssrn.511822

Erik Peek (Contact Author)

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM) ( email )

Burg Oudlaan 50
Room T08-53
3062 PA Rotterdam, 3062 PA
Netherlands

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Rick Cuijpers

University of Maastricht - Department of Accounting and Information Management ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands

Willem F.J. Buijink

Tilburg University - Department of Accounting & Accountancy ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

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