<abstract xmlns="http://www.w3.org/1999/xhtml">

<p>Under increasing macroeconomic uncertainty, governments base their economic policies on high-precision GDP estimates. The models considered based on building-up government budgets incorporate main drivers of economic growth, identified along a large range of empirical studies, mostly focused on economic productivity, factor accumulation, human capital, innovation and transfer of technology, structural changes, or institutional framework. However, there is little evidence related to the impact of accounting and assurance regulation on economic growth. Our study attempts to assess the significance of causal relation between forecasting error on GDP growth and quality of accounting standards, respectively quality of financial statements. The study analyzes the causal relation between country level measures of quality of financial reporting, synthetized by Isidro et. al. (2019), and the measure of GDP growth estimate mean error. Our results confirm a significant impact of quality of the output of financial reporting practice, related to disclosure quality and asymmetric timeliness. The results remain similar, even after controlling for accounting convergence influence. Checking for robustness of the model, we observe the main drivers of one year ahead GDP forecast error are related to institutional framework to issue high quality standards and enforce them properly. The results emphasize once again the role of economic development and corresponding complexity of economic activities and political framework impact on accounting regulation and subsequently on macroeconomic measures.</p>
</abstract>

Under increasing macroeconomic uncertainty, governments base their economic policies on high-precision GDP estimates. The models considered based on building-up government budgets incorporate main drivers of economic growth, identified along a large range of empirical studies, mostly focused on economic productivity, factor accumulation, human capital, innovation and transfer of technology, structural changes, or institutional framework. However, there is little evidence related to the impact of accounting and assurance regulation on economic growth. Our study attempts to assess the significance of causal relation between forecasting error on GDP growth and quality of accounting standards, respectively quality of financial statements. The study analyzes the causal relation between country level measures of quality of financial reporting, synthetized by Isidro et. al. (2019), and the measure of GDP growth estimate mean error. Our results confirm a significant impact of quality of the output of financial reporting practice, related to disclosure quality and asymmetric timeliness. The results remain similar, even after controlling for accounting convergence influence. Checking for robustness of the model, we observe the main drivers of one year ahead GDP forecast error are related to institutional framework to issue high quality standards and enforce them properly. The results emphasize once again the role of economic development and corresponding complexity of economic activities and political framework impact on accounting regulation and subsequently on macroeconomic measures.

Analysis on the Effects of Quality of Financial Statements, Over GDP Forecasting Models. An Empirical Cross-Country Approach

Studies in Business and Economics

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Under increasing macroeconomic uncertainty, governments base their economic policies on high-precision GDP estimates. The models considered based on...

Analysis on the Effects of Quality of Financial Statements, Over GDP Forecasting Models. An Empirical Cross-Country Approach

Publié en ligne: 26 janv. 2021

Pages: 236 - 260

DOI: https://doi.org/10.2478/sbe-2020-0056

Mots clés
disclosures, value relevance, timeliness, harmonization, enforcement

© 2020 Burca Valentin et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Analysis on the Effects of Quality of Financial Statements, Over GDP Forecasting Models. An Empirical Cross-Country Approach

Publié en ligne: 26 janv. 2021

Pages: 236 - 260

DOI: https://doi.org/10.2478/sbe-2020-0056

Mots clésdisclosures, value relevance, timeliness, harmonization, enforcement

© 2020 Burca Valentin et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Mots clés
disclosures, value relevance, timeliness, harmonization, enforcement