3 years ago

an investigation of the usefulness of accounting information for ...

an investigation of the usefulness of accounting information for ...


CONCLUSIONS This study contributes to the current literature on the usefulness of accounting information in the context of Mauritian markets. It has examined the opinions of a sample of financial analysts and brokers who are members of the FSC in respect to the usefulness of a number of items of accounting information for investment decision making. Moreover, a comparison of the level of importance of different types of disclosure has been carried out namely; historical v/s forward-looking information; mandatory v/s voluntary information; and quantitative v/s non-quantitative information. The results show the relative importance rewarded to different items of information, with the highest scores being allocated to cash flow statement and dividends per share consistent with previous studies (Ou & Penmans, 1989). In addition to that, the results emphasize that financial analysts and brokers in Mauritius pay more attention to mandatory, forward-looking and quantitative information. These perceptions reflect the type of information available to financial analysts and brokers in the context of Mauritius. Moreover, the findings do also point out that financial analysts and brokers view forward-looking information such as forecast earnings, percentage growth goals for revenue and EPS, long-term financial leases, future plans, disclosure of subsequent events and management’s plans as useful inputs for investment decision making. This result suggests that companies should shed light on forward-looking information as well. Throughout the analysis exercise it has also been found that mandatory information is quantitative in nature and most voluntary accounting information is nonquantitative in nature. Furthermore, the results show that there are significant differences among the professional users in Mauritius including brokers and financial analysts in assessing the list of accounting information with respect to their level of qualification, working experience and post occupied. For instance, firstly brokers found both income tax expense and inventory costing method useful when assessing the feasibility of investing in shares. Secondly, respondents possessing a master degree have found net income reported, diluted earnings per share, research and development costs, policies regarding accounting standards and contingent liabilities useful when indulging in an investment decision-making process. Last but not the least, respondents having a working experience that lies between 1 and 5 years, found the following information useful when assessing the viability of investing in shares; net income reported, goodwill & other intangibles, disclosure of subsequent events, research & development costs, capital expenditure, comparison of actual business performance to previously disclosed opportunities, risks and management’s plans and entities objectives. 14

RECOMMENDATIONS AND LIMITATIONS OF THE STUDY The analysis of this study reveals the most and least useful items of information under each disclosure category. Thus, this can be used as a tool to inform market regulators such FSC and companies in Mauritius about useful information for stock valuation from a user perspective. The findings of this research could also be useful in informing companies and market regulators about the types of information that financial analysts and brokers find useful for investment decision making and areas of disclosure where financial analysts suggest there is still scope for improvement. The response rate of this survey is 50%; however for future research, the mode of administration of questionnaires could be improved so as to achieve a better response rate. For instance, a mix-up approach can be used including online questionnaires, follow-up via frequent calls and interviews to track maximum respondents. The sample size for this study is 60; however this can be increased by adding on other user groups who are directly or indirectly involved in the investment decision-making process such as private shareholders, finance directors and auditors. Future similar research studies could also compare the importance of different types of disclosure such as historical and forward-looking information in different emerging markets such as the Stock Exchange of Mauritius in order to draw a more firm conclusion. Nevertheless, the current study provides a useful starting point for future investigation in this area. 15

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