The Analysis of Financial Reporting Quality Characteristics in Stability and Shocks Periods: Is There an Impact of Managerial Overconfidence in the Light of Competition Level in the Products Market as a Moderating Variable? An Empirical Study on the Egyptian listed companies

Document Type : Original Article

Authors

1 Assistant Professor of Accounting Faculty of Commerce Zagazig University

2 Accounting Department Faculty of Commerce Zagazig University

Abstract

Financial markets decisions depend on accounting information usefulness as important standard of decisions quality. Therefore, several studies analyze financial reporting quality characteristics in different environments. The current research uses some models to measure these characteristics in the Egyptian market as the first objective. Also, the variance of these characteristics in the periods with different traits in its environment certainty degrees is investigated as the second objective.  The results of accounting literature indicate that the response of financial reporting quality to managerial overconfidence is variant. Hence, the researchers investigate two things. First, the moderating effect of competition in products market on the relation between managerial overconfidence and financial reporting quality. Second the impact of the moderating effect variance in periods with different traits. A sample over the period from 2000 to 2021 with 1320 firm-year observations is selected. The sample period is divided into five basic periods. First, before the exposure for shocks. Second, after the exposure for financial and political shocks. Third, during the financial crisis. Fourth, during political crisis. Finally, Covid-19 crisis represent the last period. The results indicate that financial reporting quality is variant with the different periods where the highest quality occurred in the first stability period based on the proxy developed by the researchers. Also, the quality is decreased in the remaining periods which indicate that financial reporting quality characteristics is decreased in the three shocks periods and in the following period. In addition, the managerial overconfidence interaction is significant in political and financial shocks periods and in the following periods. Also, the managerial overconfidence interaction is insignificant in the periods, before the exposure for shocks and Covid -19 period which indicate that competition in the shocks periods represent external governance mechanism can mitigate opportunistic managerial behavior in contrast to stability period where the moderating effect of competition is insignificant.

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