Examination of Financial Reporting Quality and Informativeness from the Perspective of Accounting Restatement: Evidence of Mongolian Stock Exchange Listed Companies

Abstract

The study revealed poor financial reporting quality among Mongolian Stock Exchange top 20 index listed firms as restating the previously published financial reports and providing poor disclosure about the restatement. The study used cumulative abnormal return to analyze the market response towards the restatements. And further we produced restatement disclosure index method to evaluate the informativeness of financial statements and to evaluate how supportive are the disclosures of financial statements in forming a decision by the financial statement users. It was not surprising that our results revealed that capital market does not react towards the restatement. The analysis was further supported by the finding that financial statements are not providing sufficient information through disclosures. The poor financial reporting practice was not varied by whether state ownership is participated or not. Also the frequency of restatements is not reducing over the analysis period. The result indicates low accounting credibility in Mongolia and those poor quality financial reports do not bear a cost.