The timeliness of external financial reporting in Malta : an analysis

Abstract

PURPOSE: Timeliness is an important qualitative characteristic of financial reporting as it ensures that users receive relevant financial information in time to influence their decisions. This study examines the extent of timeliness during the years 2013 – 2017 by analysing the time taken by Maltese firms to publish financial statements and their compliance with Maltese regulatory deadlines. It also investigates the effect of implementing the General Accounting Principles for Small and Medium Entities (GAPSME) 2015 on the timeliness of financial reporting, and how ten factors may influence this qualitative characteristic. DESIGN: The analysis was conducted using a mixed research approach, with a predominant quantitative aspect. Quantitative data was first analysed using a series of statistical techniques. The results were then discussed with a highranking officer at the Malta Business Registry to obtain further insights from a professional in the field. FINDINGS: On average, Maltese companies filed their financial statements close to regulatory deadlines. The results show that in the short term, the implementation of GAPSME 2015 negatively affected the timeliness of financial reporting. Private companies that are profitable or operating in the financial industry were found to publish their financial statements earlier. Longer periods are experienced by owner-managed companies or those with qualified financial statements. In modelling the likelihood that financial statements are submitted within the regulatory deadlines, a negative relationship was found in the case of the company size and a qualified audit opinion. Conversely, firms that are older; profitable; operating in the financial industry; or have a 31st December accounting reference period were found to be more likely to comply with statutory deadlines. CONCLUSIONS: The findings suggest that regulatory deadlines are a principal factor influencing the timeliness of financial reporting. Increased awareness about the importance of timeliness and higher late filing penalties may improve timeliness in Malta. This could enhance the usefulness of financial information for users of financial statements. VALUE: The research findings provide valuable insights to the regulator, practitioners, and users of financial statements, in better understanding the behaviour of Maltese firms with regard to the publishing of financial statements.