The Quality of Corporate Annual Reports: Evidence from Libya
It was not long before it became clear that the centralised economic planning and control of business and property had failed to improve the Libyan economy. The government began to introduce economic reforms, privatisation programs and started to move towards a market economy. Many business and investment barriers and limitations have been removed and more liberal economic policies have been adopted. Reforms have been aimed at boosting private sector activities and expanding the ownership structures of business. These have generated much local interest in corporate reporting and the need to assess corporate reporting disclosure. This study attempts to assess the quality of corporate annual reports published by Libyan companies. In other words, to what extent do financial reports published by Libyan companies meet their users' needs? To achieve this objective, two research methods were undertaken. The first method was based on a survey questionnaire designed to explore the perceptions of several user groups of corporate reports. These include mainly the extent of use, the useful characteristics, the importance of different sections, information items and the user's needs and the understandability of corporate reports. The user groups included individual investors; academics (researchers); government employees; institutional investors; bank credit officers; chief executives; and accounting professionals. The second method was based on analysing a sample of corporate annual reports published by Libyan companies. The analysis aimed to identify the level of corporate disclosure as well as to what extent Libyan companies do comply with International Accounting Standards (IAS). The results of the study revealed that the corporate annual report is the most important source of information relied upon to make informed decisions. The results also showed that the credibility and timeliness of the information source were the most important qualitative characteristics that might affect the usefulness of information sources. Although there are no accounting standards, the results demonstrated that Libyan companies strongly comply with international Accounting Standards. Employing regression analysis, the study also identified some differences in the level of annual disclosure. For example, Libyan manufacturing companies that have good sales figures and government organisation or their agents tend to disclose less information than other companies.
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