The effect of financial secrecy towards internet financial reporting disclosure and its implications for earnings quality

Abstract

This study aims to determine the effect of financial secrecy on internet financial reporting disclosure and its implications for earnings quality in five ASEAN countries simultaneously. It uses leverage and company size as control variables. Financial secrecy is measured using the Financial Secrecy Index obtained from the Tax Justice Network, while internet financial reporting disclosure is measured using the Measurement Schemes of Format and Content. Earnings quality is measured by discretionary accruals using the Modified Jones model. The sample consists of 263 companies selected through purposive sampling from manufacturing companies listed on the stock exchanges of Indonesia, the Philippines, Singapore, Thailand, and Malaysia in 2018. The study employs the path analysis method with a significance level of 5%. The results indicate that financial secrecy has a significant negative effect on internet financial reporting disclosure, while it has a significant positive effect on earnings quality. Furthermore, internet financial reporting disclosure positively affects earnings quality, and financial secrecy, mediated by internet financial reporting disclosure, significantly impacts earnings quality.