The informational value of deferred tax disclosures : the Maltese stockbrokers’ perspective

Abstract

Purpose: The purpose of this dissertation is to analyse the perception of the Maltese Stockbrokers on the deferred tax disclosures in a published set of financial statements. Furthermore, it looks at how these disclosures influence the investment decisions of investors and the impact on the advices given by the Maltese Stockbrokers. Finally, it also looks at studies carried out by other researchers that look at the areas that have been outlined in the conclusions reached in this study. Design: This dissertation takes a qualitative stance since the primary data is collected in a non-standardised form and analysed using conceptualisation. The interview will be used as the research instrument to collect the necessary primary data. An interview guide will be drawn up that may change between subsequent interviews as the research progresses. Eventually, qualitative data analysis will be applied to analyse the data collected. Initially, open coding will be applied to conceptualise the data. Finally, the constant comparative method of comparing incidents in the data gathered will help to identify a thematic analysis. Findings: The findings of this dissertation show that deferred tax is minimally used by the Maltese Stockbrokers in their decision-making process and when giving advice to their clients. It was also discovered that it is even less used by the investors who seek to invest their money, where the major two issues outlined were the low financial literacy of the Maltese investors and the need of better disclosures in the financial statements. Furthermore, it was also found out that the tax disclosures in the financial statements provide enough information for the Stockbrokers to base their decisions on. However, there were mixed opinions on the proper amount of information that should be provided, where some claimed that there is too much information while others claimed that the more information there is, the better it is for the decision-making process. Finally, it was also found out that even though deferred tax is minimally used by the Maltese Stockbrokers and the Maltese investors, the Maltese Stockbrokers think that it still must be disclosed in the financial statements of future periods since the inclusion of the deferred tax will ensure that the financial statements give a true and fair view. Conclusions: The general conclusion reached was that the informational value of the deferred tax disclosures is minimal for the Maltese Stockbrokers and investors. In fact, most of the Stockbrokers interviewed outlined that the deferred tax element does not influence their decision-making process and the advices given to the investors. Implications: The conclusions reached in this dissertation highlight the need to increase the knowledge of the Maltese Stockbrokers and investors on the deferred tax element so that these can understand it better when evaluating a set of published financial statements. Furthermore, there should be better disclosures in the financial statements to help increase the informational value of the deferred tax disclosures.