Rina

Rina Zana
Zana Bee
Bee Nisa
Nisa Sha
Sha Suzie
Suzie
 Introduction
Main purpose :-
 To explore the perception of various user groups of
financial information about corporate annual
reporting in Kuwait.

 In 1991, kuwait adopted the IASs. It was, therefore,

important to identify the importance that the kuwaiti
user groups attach to a number of information items
requested by the standards.

 The annual reports published by the kuwaiti

companies contain voluntary disclosure items.
 Kuwait is one of the major oil exporting countries in the
world.

 Kuwait hosts the oldest and most developed stock

exchange in the Arab Gulf region.

 Kuwait also hosts one of the most developed banking

sectors in the region that accounts for more than 30
per cent of the stock market’s capitalization.

 The requirements of corporate reporting in Kuwait are

influenced by the International Accounting Standards
(IASs) and the listing requirements of the Kuwaiti
Stock Exchange (KSE).
 1) Profil of user group
Subject groups and response
rates
Subject groups Distributed Received Response
questionnaire questionnaire Rate (%)
Institution investors 50 41 82
Individual investors 50 42 84
Bank loan officers 50 36 72
Government officials 50 39 78
Financial analysis 50 36 76
Academics 50 38 78
Auditors 50 39 70
Stock market brokers 50 35 77
Total and over all 400 306 77
response rate
2) Important of various sources of

 Corporate information
individual investors and stock market
brokers indicated that information
directly obtained from the company
is their most important source of
corporate information.
 3) Characteristics of useful corporate
information

The usefulness of corporate information

with characteristics such as
timeliness ,availability of specific
information , understandability,
neutrality, credibility ,easy access to
sources of information and independent
 4) The usefulness of the annual report
• How the annual report can be useful?

 Help investors to predict dividends of the

company
 Useful in making informed investment
decisions and assessing the user in evaluating
the company’s performance.
 Useful in monitoring their investment and in
comparing a company's performance with
others.
5) understandability, credibility, importance and
timeliness of different parts of the annual report
i). understandability
 The auditor’s report is the easiest part to
understand in the annual report.
 Abu-Nassar and Rutherford (1996), who found the
auditor report easy to understand and the
statement of accounting policies relatively difficult
to understand in a similar environment.
 The director’s report contains descriptive and
simple statistical information that the user can
understand.
 The general result point to the fact that
participant from various user group do not seem to
have major difficult ties in understanding different
sections of the annual report.
 ii) Credibility
credibility Freq 1n=(41) 2n=(36) 3n=(36) 4n=(39) 5n=(36) 6n=(38) 7n=(39) 8n=(35) Mean SD Rank

Directors 306 2.88* 2.52 2.61 2.64 2.89 2.24 2.69 3.11 2.69 0.80 4
report

Financial 306 4.07 4.38 4.17 3.59 3.97 3.45 4.18 3.91 3.96 0.68 1
statements

Auditor’s 306 4.07 4.33 4.11 3.56 3.97 3.39 4.10 3.80 3.93 0.71 2
report

Notes to 306 3.66 4.10 4.03 3.56 3.89 3.18 3.95 2.94 3.67 1.02 3
financial
statements

Kendall’s 0.15 0.20 0.36 0.47 0.22 0.45 0.42 0.45 0.27
coefficient of
concordance
W
(mean
Values)
iii) Importance
credibility Freq 1n=(41) 2n=(36) 3n=(36) 4n=(39) 5n=(36) 6n=(38) 7n=(39) 8n=(35) Mean SD Rank

Boards of 4.3 2.24 2.69

306 2.52 2.61 2.64 2.89 3.11 2.69 0.80 4
directors
report

Auditors 4.5 1
306 4.38 4.17 3.59 3.97 3.45 4.18 3.91 3.96 0.68
reports

Balance sheet 4.6 4.10 2

306 4.33 4.11 3.56 3.97 3.39 3.80 3.93 0.71

Income 4.8 3
306 4.10 4.03 3.56 3.89 3.18 3.95 2.94 3.67 1.02
statement

Returned 306 4.5 4.6 4.6 4.7 4.6 4.7 4.8 4.9 4.7 0.6 2
earning
statement

Cash flow 306 4.6 4.4 4.8 4.9 4.6 4.9 4.9 4.9 4.7 0.5 2
statement

Note to the 306 3.9 4.8 4.6 4.1 4.4 4.3 4.6 4.2 4.1 1.1 6
account

Kendalls 306 0.16 0.21 0.38 0.51 0.23 0.50 0.44 0.50 0.28
coefficient
concordance
W
iv)Timeliness
 Timeliness of information is one of the main aspects of
relevance.

 Timeliness is important to ask the various groups of

investors about their perceptions regarding the timeliness
of annual financial information.

 Viewing a sample of annual reports published by kuwait

companies showed variations in the publication date of the
annual report and the end of the corporate financial year.

 The relevancy or otherwise of corporate information is

dependent on the speed of its publication.
 6) Rating the importance of disclosure items
required by accounting standards
 The respondents were invites to express the degree of
importance they attach to each of these items using a
Likert- Type scale.
 Bank credit mangers and financial analysts showed that
almost all listed items of disclosure are very important.
The results are predictable, since the International
Accounting Standards emphasized them due to their
importance to the users.
 The result is Similar with Stanga and Tiller, where they
found net income to be the most important items of
disclosure to creditors, it is not consistent with the result
obtained by Firth (1978), Ibrahim and Kim(1994) and
Wallace(1988), who found that those who took part in
their studies attach low rating to income.
 7) Rating the importance of voluntary
disclosure items.
 A list of expected items of voluntary disclosure that might appear in
the annual report was given to participants to indicate the degree of
importance that they attach to each of these items.
 The respondents from all target groups, or within the sample as a
whole, attach a certain degree of importance to all listed voluntary
disclosure items. However, the table points to variations between
the target groups.
 Disclosure items such as the percentages of salaries/total salaries
paid to Kuwaitis and the percentage of Kuwaiti/ total employees
employed by a firm were ranked at the bottom of the list.
 The results are predictable in a small and rich society like Kuwait,
where the government plays a major role in creating job
opportunities to university graduates.
 On the other hand, since Kuwait has a limit numbers of companies,
different users of the annual reports are expected to focus on the
profitability and solvency of the firm concerned.
 The main purpose of this study is to provide empirical evidence on the
usefulness of the various aspects of corporate information to Kuwait users.
 Consequently, eight user groups were surveyed: individual and institutional
investors, bank credit officers, government officials, financial analysts,
academics, auditors and stock market brokers.
 This reflects both the nature of Kuwaiti business and Kuwaiti social
environment, where companies are mainly limited to a small population. This
is expected to develop a close relationship between companies and
investors.
 The user groups considered credibility and timeliness as the most important
features of useful corporate information.
 The analysis showed that the Kuwaiti users attach little importance to the
auditor’s report, since it is only a matter of routine and also corporate
income tax is not paid in Kuwait.
 In sum, the perception of user groups to different aspects of the annual
corporate report, from an emerging economy like Kuwait, seems to be
generally similar to that of the users in the developed economies.
Wassalam…