Financial reporting quality and information asymmetry (A case of Iranian firms)

Abstract

The purpose of this paper is to examine empirically the impact of financial reporting quality on information asymmetry in Iran. Using three different attributes of financial reporting quality including: accruals quality, earnings persistence and earnings predictability, data analysis over a period of five years (2008–2012) revealed that accruals quality is negatively and significantly associated with information asymmetry. We also find that, firms with more earnings predictability have lower level of information asymmetry. However, contrary to expectation, we fail to find a significant association between earnings persistence and Iranian firm’s information asymmetry. These findings have implications for policy makers, managers, investors and researchers in general and those in emerging markets in particular.