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The effect of financial statements readability on the agency cost
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Mohsen Rashidi *   |
| lorestan university |
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Abstract: (1178 Views) |
| The ambiguity in the readability of financial statements has led to a reduction in the ability of investors to analyze and understand financial information and can be a factor in modifying the agency cost. The purpose of this paper is to examine the role of audit quality and the quality of internal controls in adjusting the relationship between the readability of financial statements and agency costs. In order to study the subject, the combined data regression model was used during the period of 2009 to 2018 and the data of 120 companies accepted in the Tehran Stock Exchange were collected and used to test the research hypotheses. The results of the first hypothesis of the research based on the significant effect of financial statements readability on the company's agency costs have been confirmed. The second hypothesis of the research suggests that audit quality has a significant effect on the joint interaction of the readability of financial statements and agency costs. Finally, the results indicate that the quality of internal controls does not have a significant effect on the joint interaction of financial statements and company agency costs. The results of the research indicate that increased in readability of financial statements leads to an increase in the quality of information provided to minoring shareholders and analysts, and information asymmetry is reduced through more transparency between managers and stakeholders. . In other words, increasing the readability of financial statements by controlling managers' opportunistic behaviors leads to lower agency costs and the quality of audit due to improved disclosure quality, leads to a reduction in ambiguity in information and agency costs. |
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| Keywords: Financial statements readability, Agency cost, Audit quality and Internal control quality |
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Full-Text [PDF 462 kb]
(518 Downloads)
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Type of Study: Research |
Subject:
Auditing
Received: 2020/06/25 | Accepted: 2020/10/31 | Published: 2022/03/27
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