Summary of findings Saudi Arabia - Essay Example

?Chapter 5: Conclusion and Recommendation 5 Summary of findings The dissertation set out to explore the manner in which corporate information and disclosures are disseminated through the internet are perceived by investors and analysts in Saudi Arabia. The objective also included an assessment of the manner in which Saudi public companies presented their financial information through their official websites, for the benefit of their investors. The study was guided by the theoretical framework defined under the Technology Acceptance Model and the Innovation Diffusion Theory. TAM incorporated perceived ease of use, perceived usefulness, intention to use, and usage behaviour (Khosrow-Pour, 2006). On the other hand, Innovation Diffusion Theory enumerates stages through which innovation diffusion is introduced into society – awareness, early adoption by innovators, assessment and endorsement by opinion leaders, and finally acceptance by the general public (Baran & Davisi, 2011). In the study, findings reveal that the users of IFR in Saudi Arabia belong to the investors, businessmen and the professional class, who comprise the opinion leaders of the Saudi Arabian society. Reliance upon IFR and regular patronage of financial reports in company websites by this class of society constitutes the penultimate stage when the public would generally come to rely on IFR. It is even likely that this has already occurred at present. Analysts, students, academe, join the small investors in sourcing these reports, confident in their truthfulness and reliability because of compliance with standards specified in disclosure regulations (GPDS) enforced by the SOCPA, the international accounting profession as well as the government. As for perceived ease of use (facility), usefulness (relevance), intention to use (confidence) and usage behaviour (adaptability), respondents indicate that they experience relative ease of access to IFR (Table 7), ease of locating the IFR (Table 14), ease of comparing IFRs of different companies (Table 15), and that website contact was effective as a rule (Table 9). Reports were presented in convenient formats (Table 8), namely PDF and Excel spread sheet, which increases the usefulness and facility by which the information may be put to use. The information is proven reliable by the inclusion of the audit report and signature with the online version (Tables 10 and 11). These elements contribute to a heightened sense that the IFR data are created in the form and with the substance and reliability that engender trust and confidence in the information and the system that made it possible. From the perception study conducted in the course of this research, there is an apparent consensus among IFR users that financial information published in company websites have attained the level of trust and confidence investors have formerly reserved for the hardcopy audited financial statements issued by external auditors. They agree that the web copy’s counterpart is complete, reliable, useful, and important to performance (Items 8, 9, 10 and 16 of Table 13, and Item 6 of Table 20). However, they likewise agree that the IFR disclosure might be influenced by politics, the internal auditor (despite the fact that audited financial statements are generated by external auditors), the ownership structure, and the company board (Item 13, 18, 19 and 20), all of whom have vested interests in the image of the company which may be projected by the IFR. This is an interesting pragmatism displayed by the investor respondents, to realize the possible existence of conflicts of interest in the preparation and publication of the IFR, and yet to repose trust and confidence in it. The reason appears to be anchored upon the reliance of the public on the government’s surveillance mechanism and the political will of a bureaucracy that aims to play a more significant role in global trade and economy. This reliance is underscored by the exceptionally strong agreement among investors that they rely upon the IFR specifically to select their equity investments in the Saudi Stock Market (Item 17). There are perceived shortcomings in the method and reporting of the IFR system which investors have indicated in the survey. Overall, majority of investors consider that the information contained in IFRs are “sufficient,” although a highly significant minority approximating one-third of all investors feel that it is insufficient (Table 16). For a tool that is supposed to proxy a public document, there are a significant number of target users who have reservations that information contained in the IFR for it to be considered “sufficient” or satisfactory. This appears to be corroborated by the estimation that investor requests for additional information exceed half the total of available information on the IFR (Table 17). The deficiency appears to be in quantity (but not frequency – Item 15, Table 20) rather than quality or typology, however, because a conclusive majority of investors do not wish to modify or change the IFR as it presently stands (Table 18). Overall, and despite the shortcomings, there is general acceptance of the use of IFR among its most important users – the investors who acquire shares in publicly listed corporations – who are happy with it and feel that it is an improvement over the former reporting system which relied on conventional hard copy systems (Table 20). A great part of the trust reposed in the IFR springs from the trust reposed in the technology behind it, the acceptance of Internet-based information as accurate, reliable, and timely. It is also likely that the faster reporting protocol offered by the IFR enables investors to arrive at faster and more confident decisions about their transactions in an electronic trading system both domestically and in international stock exchanges. In order to support the demands of a faster moving and globalized financial market, it is necessary that the system of information delivery be likewise speeded up and enhanced for accuracy, relevance, and completeness. 5-2 Conclusion This research intended to examine how Saudi users of financial information perceive this information when disclosed on the Internet, including financial and non-financial corporate information. It arrives at the conclusion that there is a general positive perception of the reliability, accuracy, timeliness and relevance of the information provided by internet-based sources particularly the IFRs under the auspices of public corporations. Investors are aware that there are pitfalls and shortcomings in the system, particularly in the existence of possible conflicts of interests and undue influences in the preparation of the company-published reports, but they have chosen to repose confidence and trust in the will and power of authorities to ascertain that companies and auditors abide by disclosure standards as set forth by the SOCPA. The fact that publicly available information may be perused by anybody, even and especially the authorities, has further buttressed the perception that compliance monitoring and surveillance may be greatly aided by the IFR. Overall, there is little doubt that IFR is a necessary innovation in the area of public disclosure and information dissemination. Trading in the financial markets, equities included, have become online and real-time, requiring the astute investor to make quicker decisions concerning his investments. Decisions could only be made, however, in the presence of reliable and meaningful information, which a quarterly (and oftentimes delayed) release of hard copy reports from the corporation could not even approximately fulfil. Where trading is real time, information should also be real time. The IFR would prove a valuable tool in the deterrence of insider trading and possible corruption in corporate governance, and would greatly enhance the image of the Saudi Arabian Stock Exchange as a viable prospect for international equity investors. 5-3 Recommendations for future research This dissertation was undertaken with the best effort possible under constraints of time, cost, and logistics; hence, while it has yielded very useful conclusions, there are limitations that may be addressed by future research. The study conducted had sourced information from a survey participated in by a relatively small sample of 31 respondents. The participants were qualified as to their qualifications, being knowledgeable financial and investment analysts in the field, and a relatively high level of agreement had been gathered among them, which lends to the reliability and credibility of the conclusions. It would further build on these conclusions, however, to conduct a broader survey including the investors themselves who, because of their greater heterogeneity, should comprise a larger sample size. This survey gathered perceptions about the investors to whom the analysts catered; an expanded study may corroborate these findings by polling the investors themselves. Another area future researchers may address would be the further developments of reportorial requirements as specified by the joint study being conducted by the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB). This task force aims to arrive at an international framework that would be the basis for reportorial standards that would address issues of convergence and independence (Ruder, Canfield & Hollister, 2005). Developments in the international arena would necessarily impact on the GDPS and local reportorial standards in Saudi Arabia, including IFR, because Saudi Arabia’s global competitiveness depends on its keeping abreast with international standards. Future research provide new insights into the harmonization of local and foreign standards. References Baran, S J & Davisi, D K 2011 Mass Communication Theory: Foundations, Ferment and Future Khosrow-Pour, M 2006 Emerging Trends and Challenges in Information Technology Management. Covent Garden, London: Idea Group Publishing Ruder, D.S.; Canfield, C.T.; & Hollister, H.T. 2005 “Creation of World Wide Accounting Standards: Convergence and Independence.” Northwestern Journal of International Law and Business, vol. 25, p. 513. Read More