Abstract:
The present study is an attempt to empirically test a research question: whether regulatory
change can improve financial reporting timeliness in developing countries. Financial
reporting delays in Bangladesh have historically been long. In some cases companies are
found to publish results of as many as five financial years at a time. Even in 2003, company
audits in many cases can be found to take longer than eighteen months. Long audit delay is
one of the main causes behind chronic delay observed in issuing financial statements to
shareholders. In a significant move to reduce such delays, the country’s Securities and
Exchange Commission (SEC), in the year 2000, imposed a mandatory maximum of 120 days
to complete audits of listed companies. This provides an interesting setting to examine the
research question set out at the beginning. The paper reports the results of multiple linear
regressions to test the possible association between financial reporting timeliness and
regulatory change while controlling for relevant corporate and auditor attributes. Two levels
of analyses were carried out. First, using observations from 1999 and 2001, and then using the
observations from 1999 and 2003. The results show that audit delays could be reduced by
effective regulatory change. Subsidiaries of MNCs demonstrate significantly shorter delay
while companies who do not pay dividends show significantly longer delays. Company size,
audit complexity, return on equity, and audit fees (except for one model) do not appear to
have any bearing on audit delay.
