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The usefulness of accounting information; evidence from the Egyptian market

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  • Omaima Hassan
  • David M. Power

Abstract

Purpose - The purpose of this paper is to ascertain financial analysts' views regarding the usefulness of a number of items of accounting information via a postal survey. This usefulness is explored in the context of the Egyptian capital market. In addition the usefulness of different types of information is researched, namely: historical vs forward‐looking information; mandatory vs voluntary information; and quantitative vs non‐quantitative information. Design/methodology/approach - This paper uses descriptive analysis to investigate the views of a sample of 23 financial analysts regarding a number of items of accounting information. Analysts' ratings are obtained via a postal questionnaire, most of which are collected by hand. Fifteen out of 23 responses are collected in person, which offer the opportunity to ask follow‐up questions about the information which the analysts see as valuable. Findings - The findings indicate that different items of information are valued differently. In the context of the Egyptian market, financial analysts tend to value: mandatory disclosure more than voluntary disclosure; quantitative information more than non‐quantitative information; and historic information more than forward‐looking information. This type of preference reflects the information environment in Egypt, where mandatory disclosure is comprehensive and detailed based on International Accounting Standards but where compliance is an issue. Voluntary disclosure is limited and other sources of information are less common. Since mandatory information in Egypt tends to be historic and quantitative in nature, this may explain the preference for these types of disclosures. Research limitations/implications - The findings suggest that the importance of different types of information may be affected by the degree of maturity of the market and how rich the information environment is. Practical implications - The results should be useful in informing companies and market regulators about the types of information that financial analysts find useful for investment decision making and the areas of disclosure where financial analysts suggest that improvement is needed. Originality/value - This paper contributes to the literature by investigating the views of a sample of financial analysts regarding the usefulness of accounting information and different types of disclosure in the context of an emerging capital market where a dearth of studies exist.

Suggested Citation

  • Omaima Hassan & David M. Power, 2009. "The usefulness of accounting information; evidence from the Egyptian market," Qualitative Research in Financial Markets, Emerald Group Publishing Limited, vol. 1(3), pages 125-141, October.
    • Handle: RePEc:eme:qrfmpp:v:1:y:2009:i:3:p:125-141
    DOI: 10.1108/17554170910997393
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    References listed on IDEAS

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    1. Omaima A.G. Hassan & Gianluigi Giorgioni & Peter Romilly, 2006. "The extent of financial disclosure and its determinants in an emerging capital market: the case of Egypt," International Journal of Accounting, Auditing and Performance Evaluation, Inderscience Enterprises Ltd, vol. 3(1), pages 41-67.
    2. Khaled Hussainey & Thomas Schleicher & Martin Walker, 2003. "Undertaking large-scale disclosure studies when AIMR-FAF ratings are not available: the case of prices leading earnings," Accounting and Business Research, Taylor & Francis Journals, vol. 33(4), pages 275-294.
    3. Ben D. MacArthur & Richard O. C. Oreffo, 2005. "Bridging the gap," Nature, Nature, vol. 433(7021), pages 19-19, January.
    4. Al-Abdulqader, K.A. & Hannah, G. & Power, D.M., 2007. "The appraisal of ordinary shares by Saudi investors," Research in International Business and Finance, Elsevier, vol. 21(1), pages 69-86, January.
    5. Dimson, Elroy & Marsh, Paul R, 1984. "An Analysis of Brokers' and Analysts' Unpublished Forecasts of UK Stock Returns," Journal of Finance, American Finance Association, vol. 39(5), pages 1257-1292, December.
    6. Orens, Raf & Lybaert, Nadine, 2007. "Does the financial analysts' usage of non-financial information influence the analysts' forecast accuracy? Some evidence from the Belgian sell-side financial analyst," The International Journal of Accounting, Elsevier, vol. 42(3), pages 237-271.
    7. Calum A.J. Middleton & Suzanne G.M. Fifield & David M. Power, 2007. "Investment in Central and Eastern European equities," Studies in Economics and Finance, Emerald Group Publishing Limited, vol. 24(1), pages 13-31, March.
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    Cited by:

    1. Krzysztof Drachal, 2014. "Is There a Feedback Mechanism in Accounting?," European Financial and Accounting Journal, Prague University of Economics and Business, vol. 2014(1), pages 85-95.

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