The development of financial reporting in Jordan: a survey of preparers' and users' attitudes and reporting practices

When compared, the research on corporate financial reporting in developing countries has not been as in depth or widespread, as developed countries. This study attempts to fill this gap by examining the usefulness of corporate annual reports to users' needs in the Jordanian context.

The study is based mainly on empirical evidence collected through questionnaire surveys of both users and preparers of corporate annual reports as well as annual reports of Jordanian quoted companies between the period 1981 to 1990. The study questioned five major groups of users: individual shareholders, institutional shareholders, bankers, academics and stockbrockers. Preparers of corporate annual reports were represented in the study by financial directors of companies listed on the Amman Financial Market.

The evidence revealed that the adequacy of disclosure in Jordanian corporate annual reports had shown a remarkable improvement during the period between 1981 and 1990. However, such disclosure was still far from providing users with a sufficient amount of information, with companies publishing currently only about one third of what users may need.

In the analysis, the findings indicated that companies tended to improve their level of disclosure when they had good news, high dividends and a high rate of return to report to outsiders. In addition, inadequacy of disclosure was found in corporate and annual reports of a) small companies, b) less profitable companies, c) companies operating in sectors other than the insurance sector, d) companies with a low level of dividends and e) companies with a high percentage of individual shareholders ownerships.

The major factor discouraging companies to provide more disclosure voluntarily was considered by preparers to be the cost of collecting and publishing the necessary information. In contrast, the main advantage of voluntary disclosure was considered to be the improvement of company image and reputation. It was also found that companies in Jordan prepared their annual reports mainly for internal management purposes and they showed very little concern about the needs of several external groups of users such as the press, government and employees.

The study concludes that there is a strong need for improvement in the adequacy of disclosure, comparability and reliability of information published in corporate annual reports and such improvements may need more legal regulation covering financial reporting in Jordan.