Recent Researches in Applied Economics and Management - Volume I Comparative analysis of voluntary Internet Financial Reporting for selected CEE countries MARIJANA BARTULOVIĆ Accounting and Finance Department University of Split, Department of professional studies Kopilica 5, 21000 Split CROATIA [email protected] IVICA PERVAN Accounting Department University of Split, Faculty of Economics Cvite Fiskovića 5, 21000 Split CROATIA [email protected] Abstract: Comparative research on the issue of voluntary Internet financial reporting was conducted on the sample of 91 companies whose securities are listed on one of the following capital markets: Zagreb Stock Exchange, Ljubljana Stock Exchange, Belgrade Stock Exchange, Sarajevo Stock Exchange and Banja Luka Stock Exchange. The purpose of this research was to determine the achieved level of voluntary Internet financial reporting on the observed capital markets. The highest level of Internet financial reporting measured through IFR score was reported in Slovenia and it amounted 23.25, than it is followed by Croatia with an average IFR grade of 21.27. Quite lower values of IFR score were noticed on the last three capital markets. For example, IFR score equals 9.75 on the Serbian capital market, on the Sarajevo Stock Exchange the average IFR score was 6.74 and the lowest level of transparency is noticed on Banja Luka Stock Exchange where the IFR score was only 3.61. The differences of the arithmetical means of the IFR scores for the observed countries were tested using Kruskal-Wallis test and conducted analysis indicates that among five countries there is a statistically significant difference in the level of Internet financial reporting measured through IFR score. Key-Words: voluntary reporting, Internet, comparative analysis, trends 1 Introduction a small number of papers dealing with Internet Financial statements are the primary source of financial reporting on the emerging capital markets publicly available information on listed company’s of Central and Eastern Europe. A basic performance and its business activities. Therefore, characteristic of these markets during the last transparent financial reporting is crucial for efficient decade is that they have been growing rapidly, functioning of capital markets. According to modern attracting a large number of domestic and foreign accounting frameworks the aim of financial investors so it is interesting to analyze the achieved reporting and disclosure is to provide useful level of Internet financial reporting on these information about company’s financial position, markets. Comparative Internet financial reporting profitability and cash flows. analysis is conducted on a sample of listed Today, in modern business environment internet companies that list their securities on the following and its applications are unavoidable tools for markets: Ljubljana Stock Exchange, Zagreb Stock disseminating financial information to investors and Exchange, Banja Luka Stock Exchange, Sarajevo other users. Since Internet is widely used for Stock Exchange and Belgrade Stock Exchange. informing investors and other users about business The basic purpose of this paper is to determine activities and financial performance of listed the achieved level of Internet financial reporting companies there is a large number of scientific measured through IFR score and compare it among papers which analyzed Internet financial reporting five selected markets. practices of listed companies in USA and EU. However, it is important to notice that there are still ISBN: 978-960-474-323-0 296 Recent Researches in Applied Economics and Management - Volume I 2 Prior research own Web site while only 48.33% of them use these The development of Internet technology and the pages for financial reporting. expansion of its use for voluntary financial reporting In another type of studies, so called comparative have stimulated a large number of academic studies research, authors analyze and compare Internet in this area. Research related to Internet financial financial reporting practices for two or more reporting can be classified in the following three countries. Use of Internet for investor relations was, categories: research related to practical application among others, analyzed in studies conducted by of Internet financial reporting in individual Deller et al. [6] and Geerings et al. [9]. Deller et al. countries, research related to comparison of Internet [6] analyzed the role of Internet in investor relations financial reporting practices between different and research was performed on a sample of largest countries and research into the factors that affect US, UK and German corporations. According to the financial reporting on the Internet in individual research results 91% of US corporations used the countries. Internet for investor relations and this practice is The first type of research, so called descriptive little less common for UK and German corporations research is focused on examining general where 72 or 71% of the companies has Investor characteristics of the use of Web for financial relation via the Internet. reporting in individual countries. Within the Comparative research for companies from five research results the authors provide data about the countries (USA, Canada, UK, Australia and Hong percentage of corporations that use Internet financial Kong) for the years 2001 and 2002 was carried out reporting, the types of financial reports issued by Allam and Lymer [1]. This study showed that (balance sheet, profit and loss account,...), the most of the companies (96100%) published their frequency of publishing the reports (annually, half- balance sheet, profit and loss account and cash flow yearly,...) and the format of published reports (pdf, report. Furthermore, the authors provided data that Excel,...). An example of an early study related to PDF was the most frequent format for the this topic is the research conducted by Brennan & presentation of reports while formats suitable for Hourigan [5] on a sample of Irish corporations. calculations (such as Excel) were found only in 12% According to the research results only 37% of listed of the observations. Geerings et al. [9] conducted Irish companies published their financial reports on research at a sample of 50 largest companies from the Internet. France, Holland and Belgium quoted on Euronext. Hedlin [11] founded out that the majority of According to the research results companies from Swedish firms listed on Stockholm stock exchange France and Holland use the Internet for investor did use financial reporting on the internet. Similar relations purposes more than Belgian companies. results have been reported by Hurtt et al. [12]. Furthermore, companies from all three countries Namely, at the sample of 100 biggest corporations presented their basic financial reports on the Net in the USA (Fortune 100) authors came to the result very frequently while some of the advantages of that 93 companies had their own Web site. Internet reporting (such as formats suitable for Furthermore, 74% of companies publishes balance calculations, mailing lists and multimedia) were less sheet on their Web pages and 70% of companies frequently used by Belgium companies. announces profit and loss account as well as cash Third type of studies dealing with Internet flow statement. financial reporting is focused on factors affecting As examples of descriptive research conducted in corporate decisions concerning their level of the world studies that were conducted by Internet financial reporting. As example for this type Gowthorpe & Amat [10] and Ettridge et al. [8] can of research, study conducted by Pirchegger and also be pointed out. In 2005 Pervan [15] conducted Wagenhofer [18] for Austrian and German quoted a research on a sample of 38 Croatian listed companies can be pointed out. Firstly, authors companies, and according to the research results evaluated the quality of website based on financial only 39.4% of the observed companies voluntary and non-financial criteria and then achieved grades published a set of five financial reports on their web for each company were used in regression analysis pages. Research on Internet financial reporting as the dependent variable. As independent variables practices for Romanian companies whose shares are the size of the company and the percentage of shares quoted on a stock exchange in Bukurest was traded on stock exchange were used. The research conducted by Bogdan et al. [2] and as the most results showed that for the sample of Austrian important research results authors provide the data companies Internet financial reporting quality was that 76.66% of the observed companies has their positively and significantly correlated with both independent variables while for the German sample ISBN: 978-960-474-323-0 297 Recent Researches in Applied Economics and Management - Volume I positive and significant correlation was confirmed sectors and market capitalization while the other 55 between Internet site quality and size of the factors are grouped in five categories. All factors company. Bonson & Escobar [3] analyzed voluntary together constitute an Internet Reporting Index. The disclosure on the Internet using a sample of 300 EU average Index value for the companies quoted on companies. The sample was formed out of the 20 Athens Stock Exchange was 30.30 and weighted largest companies by market capitalization from average score was 49.71. Also, among other, each EU country. Based on 23 criteria authors