The relationship between corporate governance mechanisms and internet financial reporting in Iran

• DOI: https://doi.org/10.1108/CG-06-2017-0126
• Published date: 03 December 2018
• Date: 03 December 2018
• Pages: 1021-1041
• Author: Farzaneh Nassir Zadeh,Mahdi Salehi,Haneyeh Shabestari
• Subject Matter: Strategy,Corporate governance

The relationship between corporate

governance mechanisms and internet

financial reporting in Iran

Farzaneh Nassir Zadeh, Mahdi Salehi and Haneyeh Shabestari

Abstract

Purpose –The purpose of this study is to investigate the influence of the ownership of institutional

shareholders, the proportion of non-executive members, the percentage of ownership of major

shareholders, the duality of the tasks of chief executive officer and chairman of the board of director,

financial leverage, the amount of the remuneration of the board of director, the company’s life and the

amountof export on internet financial reporting.

Design/methodology/approach –For this purpose, the authors surveyedthe 301 listed companies on

Tehran Stock Exchange in 2015. The statistical method used to test the hypothesis of the study was

cross-sectionaldata.

Findings –The results indicate the negative impact of ratio of non-executive members and the positive

impact of financial leverage, size, liquidity and the life of the company in stock, over internet financial reporting.

Originality/value –The current study is almost the first study which is conducted in a developing

country,and the results may helpful to the other developing nations.

Keywords Corporate governance, Internet financial reporting, Non-executive director,

The age of the company

Paper type Research paper

1. Introduction

For companies to benefit from the advantages of modern globalization, to be able to trade

in the world’s leading stock exchanges and to attract low-cost and long-term capitals, some

factors, including a well-organizedplan under the supervision of the corporate governance,

are required. Along with the development of stock companies and the agency theory and

by the growth of the board duties and authorities, the question poses here is how

managers, who are not the owners of companies, pursue the interests of shareholders

(owners). The corporate governance system is in transition in the management of stock

companies from traditional management to a dynamic and independent management. In

such a structure, not only the interests of shareholders are guaranteed but also the

company is accountable to creditors, banks, consumers and, finally, the community (Aman

et al.,2011).

The main objective of financial reporting is to provide useful information for shareholders

(Agyei, 2012). Undue delay in the publication of financial statements increases the

uncertainty associated with the investment decision; it also reduces the content and

relevance of the information and increases the possibility of potential abuse (Turel, 2010).

Many companies in the world and economics level considered the corporate governance

and internet financial reporting as an important issue because of globalization and

technological progress (Zakeyaand Al-Sartawi, 2016). Therefore, the accounting profession

Farzaneh Nassir Zadeh and

Mahdi Salehi are both

based at the Department of

Economics and

Administrative Sciences,

Ferdowsi University of

Mashhad, Mashhad, Iran.

Haneyeh Shabestari is

based at the Department of

Economics and

Administrative Sciences,

Attar Institute of Higher

Education, Mashhad, Iran.

Received 23 June 2017

Revised 6 December 2017

19 January 2018

Accepted 26 March 2018

DOI10.1108/CG-06-2017-0126 VOL. 18 NO.6 2018,pp. 1021-1041, ©Emerald Publishing Limited, ISSN 1472-0701 jCORPORATE GOVERNANCE jPAGE 1021

must keep pace with the new electronic reporting and guidelines, standards and tools

necessary to provide preparers and auditors related to the electronic document (Boritz,

2008). In recent years, internet use has grown increasingly so that many companies have

designed a website for the publication of their financial data. Many companies have

accepted the internet as a useful tool for informing current and prospective investors of the

company’s financial performance. Conosco (1999) states that the cost of distributing hard

copies by fax, mail and phone (internet financial reporting) will decrease with internet

financial reporting, and the cost of providing information for each user is close to zero.

Experimental information shows that the companies that use the internet financial reporting

are generally larger and more profitable than other companies. The good firms need

something to differentiate themselves from other firms, which may be the voluntary

disclosure of information via the internet, because the usefulness of presenting clear and

voluntary information for shareholders is measured by the volume and the quality of the

information which has been provided.

Internet financial reporting relies on the assumption that information should be provided

reliably. This view formulates the basis that managers should present their financial

statements in a way that make the internet financial reporting as a reliable source. Such a

process basically refers tothe presence of a powerful corporate governance system, based

on which the company could perform its internet financial reporting procedure. Such a

relationship between the corporate governance system and internet financial reporting

could make preliminaries for many future studies. Therefore, given the proposed facts, in

this study, we investigate whether there is a significant relationship between corporate

governance and internet financialreporting.

2. Literature review and hypotheses development

2.1 The concept of financial reporting

Financial reporting is rooted in the community such that any changes in the social status will

affect the financial reporting. As it is expected today, financial reporting is more compatible

with interactive and knowledge-based societies and is changing in accordance with their

changes in information needs.The question posed here is what the position of the internet is

in the evolution of financial reporting.

To answer the question, there are different theoretical approaches, all of which are

classified into two major groupsof technological necessities and social formation. Based on

the first approach, because social changes, caused by technological changes, are

inevitable, both technological advancements and social changes are the same. On the

other hand, although some criticisms are centered on the recent approach, due to ignoring

the role of social environment in the formation of technological advancements, the basis of

most of the conducted studies on reporting is on the internet, directly or indirectly. In

contrast, the advocates of social formation approach also believe that the technological

capabilities and works are reflective of the social status, acceptance and advancement

(Omar, 2017).

2.1.1 Internet financial reporting Internet financial reporting is an interesting research topic

and has attracted increasing attention. Primary research was conducted in 1996 and 1997,

and researchers have done many studies on how theinformation will affect the decisions of

different users (Petravick and Gillet, 1996;Gray and Debreceny, 1997). Salehi and

Kangarlouei (2010) investigated the accuracy of financial reporting. These days, the

development of financial information is due to the fact that the firms can keep the financial

information on their website with a minimal cost. Internet provides access to distributed

information for different users, although the companies may also have websites. This study

examines the qualities and the relevant of internet financial reporting. The main objective of

this study is to evaluate the accuracy of the internet financial reporting of the companies

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