Internet business reporting a challenge: the case of Romanian manufacturing enterprises.

Popa, Adina ; Blidisel, Rodica ; Farcane, Nicoleta 等

1. INTRODUCTION

Due to the fact that manufacturing still represents an important part of the Romanian economy the objective of our paper is to measure the level of internet business reporting of Romanian enterprises from manufacturing sector listed on BSE and to test some variables that may influence the internet disclosure level.

After a relative deindustrialization period which Romania had passed during the '90, starting with the year 2000 it could be observed a tendency change and a gradual growth of the industry's role, sustained at the European level through the 2005 Lisbon Strategy. This tendency could be observed also within the number of manufacturing enterprises listed on BSE. In 2007 more than 70% of the BSE transacted companies are from manufacturing sector.

Communication by corporations of financial and other corporate performance data to stakeholders is a complex process of risk and information asymmetry reduction. The efficacy of this process is dependent upon the needs of the stakeholders and of the corporation management interests (Debreceny et al., 2001). Corporate disclosure is critical for the functioning of an efficient capital market (Healy & Palepu, 2001). The last decade of the 20th century brings an important scenery change in business communication: companies are attracted in their image's marketing game and trained to disseminate theirs information to the stakeholders through an environment which revolutionized the global communication and information technology--the internet.

International business environment and global capital markets impose new trends in corporate reporting; also Romanian companies that for the moment practice mostly mandatory financial reporting seem to be interested about voluntary internet reporting.

2. THEORETICAL FRAMEWORK AND METHODOLOGY

2.1 Literature review

A wide academic research exists in the field of the internet business reporting. In the early stages researchers had studied the internet reporting at country level, generally, using a descriptive or reflective research (Lymer, 1998; Deller et al., 1999). Later by using different economic theories the study of internet reporting was oriented to find and explain the determinants that influence the internet business disclosure (Ettredge et al., 2002; Debreceny et al, 2002; Xiao et al., 2004; Popa, 2008).

2.2 Methodology

Based on a quantitative content analysis the goal of our study is to find out if Romanian manufacturing companies provide the information contained in the business reports through an alternative media, the internet and not only by traditional hard copy. Because using internet for disclosing financial and non financial information facilitate stakeholders' access to information and decrease the costs with printing and disseminating the hard copy of companies' reports through the interested investors.

We investigate all manufacturing companies listed on BSE. Our sample consists of 61 companies listed on BSE at the end of year 2007 that are actively traded. The main reason to choose all the listed manufacturing companies is to explore the readiness of those companies to inform investors by providing information on their websites and to appreciate the conformity with the regulations of Romanian National Securities Commission (RNSC) regarding transparency of listed companies. This is due to the fact that RNSC and BSE are the Romanian governing bodies that encourage companies to disclose financial information on their website.

Our research instrument is based on the CIFAR study (CIFAR, 1995) and on the national and European regulations in the field of business reporting. As a research method we use content analyze for study the homepages of the sample companies developed from Weber model (Weber, 1985) and the hypothesis development.

After identifying the homepages of our sample companies we determine for each company the mean score for measuring internet business reporting, based on a list of variables predefined in the first stages of our study. To measure the disclosure level quantitatively in the present study, a disclosure index for internet business reporting (IBR) was developed:

ScorIBR = [47.summation over (i=1)][IBR.sub.t] (1)

We build a composite index for each company by assigning value of "one" to every item disclosed on the company website and value "zero" otherwise. All online financial reporting items used in this study were considered equally important. The last stage in our framework was to develop a checklist instrument. By using statistic parametric test ANOVA we verify if the listed status and the ownership structure are influencing factors of the internet business reporting score (IBR). We develop two hypotheses:

H1: Company listing tier determines the level of information disclosed.

H2: Companies with more foreign shareholders disclose more information.

3. RESEARCH RESULTS

As we define, the objective of our study is the analysis of the level of business information currently provided on internet by Romanian manufacturing companies listed on BSE and to find out in an empirical way the factors that could influence the internet disclosure level. The lists of variables we look for on the companies' websites were divided in four groups: general information, business reporting fundamental items, information for shareholders and other users and other information.

The descriptive statistic for internet business reporting score is presented in table 1. ScorIBR that shows the level of internet reporting for Romanian manufacturing sector is quit low.

Testing the first hypothesis H1, if internet business reporting score is influenced by the listing status we obtain the results presented in the table 2. The p-value in the ANOVA test (0.003) shows that hypothesis can be accepted. The information provided online by the companies varies by listing status.

Statistics and results of testing the second hypothesis H2, are presented in table 3. The enterprise ownership structure influences the level of information provided.

The p-value in the ANOVA (0.002) test shows that hypothesis can be accepted. The information provided on internet by the manufacturing companies is influenced by the majority of foreign shareholders.

4. CONCLUSIONS

The internet like a disclosure media has proved its potential for business reporting. Companies listed on BSE provide their financial statements and other additional reports by using online disclosure. The level of internet reporting obtained by us for Romanian manufacturing sector is low, but it can be appreciate as a good one, taking in consideration that BSE is a relatively new and small stock exchange and the Romanian business environment can not be compared, yet with the western developed economies. According to the results of our hypotheses: manufacturing companies listed in the first and second tier provide more complete financial information and have a high level of internet reporting, manufacturing companies that had a majority of foreign shareholders seems to use more the internet to reduce the information asymmetry between the firm and investors, this is reflected in the high IBR Score obtained by these enterprises. We can outline that company's performance and foreign stakeholders are important factors that may contribute to the improvement of the level of internet business reporting of Romanian listed companies.

The study shows that Romanian companies listed on BSE have accepted the importance of the internet as a corporate reporting media and are interested in online reporting of their business. A better understanding of these practices is an important issue for future research, identification and analyzes of all the other factors that could influence the level of internet disclosure of Romanian companies is our future plan and will give us the possibility to form a complete image about the internet reporting on BSE and also to make international comparisons.

5. REFERENCES

Centre for International Financial Analysis & Research (1995). International Accounting and Auditing Trends. 4th Edition, CIFAR, Princeton New Jersey

Debreceny, R.; Gray, G.L.& Mock, T.J. (2001). Financial Reporting Web Sites: What Users Want in Terms of Form and Content. The International Journal of Digital Accounting Research. Vol.1, No.1, 1-23, ISSN 1577-8517

Debreceny, R.; Gray, G. L.& Rahman, A. (2002). The Determinants of Internet Financial Reporting. Journal of Accounting and Public Policy, Vol. 21, No. 4, pp. 371-394, ISSN 0278-4254

Deller, D.; Stubenrath, M.& Weber, C. (1999). A survey on the use of the Internet for investor relations in the USA, the UK and Germany. European Accounting Review, Vol. 8, No. 2, pp. 351-364, ISSN 0963-8180

Ettredge, M.; Richardson, V.J. & Scolz, S. (2002), Dissemination of Information for Investors at Corporate Web Sites, Journal of Accounting and Public Policy, Vol. 21, No. 4, pp. 357-369, ISSN 0278-4254

Healy, P. & Palepu, K. (2001). Information asymmetry, corporate disclosure, and the capital markets: A review of the empirical disclosure literature. Journal of Accounting & Economics, Vol. 31, No. 1-3, pp. 405-440, ISSN 0165-4101

Lymer, A. (1998). The use of the Internet for Corporate Reporting--a discussion of the issues and survey of current usage in the UK, paper presented at the 21st Annual Congress of the European Accounting Association, Belgium, April 1998

Popa, A. (2008). Online Financial Reporting: an empirical study of companies listed on BVB., In: Managementul calitatii informafiei contabile, Georgescu I., Tugui A., pp. 239-247, Al. I.Cuza University Publishing, ISBN 978-973-703--299-3, Iasi

Weber, R.P. (1985) Basic Content Analysis, Sage Publications, ISBN: 0803924488, Beverly Hills

Xiao, Z.; Yang, H. & Chow, C. (2004). Patterns and Determinants of Internet-Based Corporate Disclosure in China. Journal of Accounting and Public Policy, Vol. 23, No. 3, pp. 191-225, ISSN 0278-4254

Tab. 1. Internet business reporting
(IBR) statistics

Companies 61
IBR Mean-Scor IBR 12.23
IBR Standard deviation 11.145
IBR Maximum 37

Tab. 2. IBR by listing status and ANOVA results

 First tier Second tier Unlisted
 companies companies companies

No. companies 6 29 26
IBR Mean 21.67 16.62 5.15
IBR Maximum 31 37 21
IBR Std. dev. 8.571 11.785 5.662
ANOVA
 Sum of df Mean F Sig.
 Squares Square

Between Groups 16962 25 0. 678 2800 0.003
Within Groups 8481 35 0.242
Total 25443 60

Tab. 3. IBR by ownership structure and ANOVA results

 Majority Majority of
 of foreign domestic
 shareholders shareholders

No. companies 15 46
IBR Mean 22.60 8.85
IBR Std. dev. 12.135 8.501
IBR Maximum 37 31
ANOVA

 Sum of df Mean F Sig.
 Squares Square

Between Groups 7654 25 0.306 2930 0.002
Within Groups 3657 35 0.104
Total 11311 60