The effect of political-economic reform on the quality of financial reporting in Egypt

Purpose - This paper aims to study the influence of political-economic reform and especially privatisation on the quality of financial reporting of the Egyptian companies. Design/methodology/approach - The paper analyses data from official documents and 34 interviews with company executives, financial analysts, external auditors and Stock Exchange regulators to inform our understanding of the relationship between changes in the Egyptian environment and the quality of financial reporting. Findings - The findings of the research suggest that the recent Egyptian political-economic reform, resulting in privatisation has significant influence on negative accounting practices and hence on lowering the quality of financial reporting through its effect on: departure from uniform accounting system and public accounting regulations; issuing new stock exchange regulative rules; reviving the role of Stock Exchange; and increasing competition within Stock Exchange regarding raising funds. Originality/value - This paper contributes to the literature by identifying the effect of socio-cultural factors on motivating executives to 7 exercise negative accounting practices and hence producing low-quality financial reports (FRs) and by highlighting the fact that accounting practices cannot be generalised worldwide due to the absence of universal socio-cultural factors which shape these practices. This paper employs new institutional sociology theory and contributes to that theory by acknowledging the active interplay between institutional context and economic environment.