Please use this identifier to cite or link to this item:
Title: Improving understandability of financial reporting : a local individual shareholder’s perspective
Authors: Micallef, John
Keywords: Financial statements -- Malta
Individual investors -- Malta
Corporation reports -- Malta
Issue Date: 2016
Abstract: PURPOSE: This study assessed to what extent local retail shareholders read and understand MLEs’ annual reports. Then, it investigated how CFRs and shareholders’ education can be used to improve investors’ understanding of the presented information. DESIGN: The objectives were reached through a questionnaire distributed to the retail shareholders attending the MSE’s Investor Education Conference, mailed to a sample of Maltese individual shareholders, and completed online by local retail shareholders. FINDINGS: Local retail shareholders significantly read the income statement and the statement of financial position more than any other item of MLEs’ annual reports. Out of every ten retail shareholders, two have a low financial reporting understanding, while three have a high financial reporting knowledge. Findings indicate that financial reporting understanding increases with both experience and education in accounting. About 74% of the respondents prefer to be provided with an audited CFR instead of a full annual report if the CFR provides them with less but the most pertinent information. A day seminar organised on a quarterly basis is the shareholders’ preferred educational sessions’ format while regulators from the MFSA are the respondents’ preferred professionals to provide them with financial education. The areas of dividends and earnings attributable to shareholders and valuation of assets and liabilities are to be given precedence over other subjects during educational seminars among retail investors. CONCLUSIONS: It can be concluded that many retail shareholders think they understand the annual reports, but they are barely making sense of the basic information presented. The accounting profession, together with the MFSA, MSE, MLEs and shareholders’ associations should help in improving shareholders’ understandability and communication of financial reporting. Immaterial information should not be reported in MLEs’ annual reports since it obscures key messages and impairs users’ understandability. Furthermore, educational programmes targeting specific retail shareholders’ segments are more likely to be effective than one-size-fits-all educational initiatives. VALUE: This study is the first to present Maltese retail shareholders’ opinions on the issuance of CFRs by MLEs. Additionally, this research can assist authorities and shareholders’ associations in formulating shareholders’ educational programmes to help local retail investors improve their understandability of financial reporting.
Description: M.ACCTY.
Appears in Collections:Dissertations - FacEma - 2016
Dissertations - FacEMAAcc - 2016

Files in This Item:
File Description SizeFormat 
  Restricted Access
3.49 MBAdobe PDFView/Open Request a copy

Items in OAR@UM are protected by copyright, with all rights reserved, unless otherwise indicated.