Corporate governance and the timeliness of financial reporting: a comparative study of the People's Republic of China, the USA and the European Union

Purpose - Timeliness of financial reporting is one of the attributes of good corporate governance identified by the OECD and World Bank. Shareholders and other stakeholders need information while it is still fresh and the more time that passes between year-end and disclosure, the more stale the information becomes and the less value it has. This paper aims to examine the timeliness of financial reporting in the People's Republic of China and to compare it to timeliness in the USA and the European Union (EU). Design/methodology/approach - The timeliness of financial reporting was measured by counting the number of days that elapsed between year-end and the date of the independent auditor's report for Chinese companies listed on the Shanghai Stock Exchange and a selection of public companies in the USA and EU. Results were then compared to determine whether there was a significant difference. This study also compares timeliness data on the basis of audit firm to determine whether companies audited by one of the Big-4 firms are more timely in their financial reporting than are companies audited by Chinese audit firms. Findings - The paper finds that Chinese companies took significantly longer to report financial results than either the EU or US companies. EU companies took significantly longer to report financial results than US companies. The vast majority of Chinese company audits were not conducted by the Big-4 accounting firms. Practical implications - Companies that are not timely in their financial reporting practices find it more difficult to attract capital. Their corporate governance practices are also seen as less than ideal, which has a negative effect on a company's reputation within the financial community. Thus, Chinese companies that are slow in reporting their financial results may suffer negative consequences in terms of reputation and ability to raise capital, all other things being equal. Originality/value - This paper is the first to compare the timeliness of financial reporting for the People's Republic of China, the USA and the European Union.