THE LINK BETWEEN FINANCIAL TRANSPARENCY AND KEY FINANCIAL RATIOS: A CASE FROM TURKEY

Year 2018, Volume: 5 Issue: 3, 321 - 327, 30.09.2018

Burcu Adiloglu , Nevzat Gungor , Goksel Yucel

Abstract

Purpose- Since globalization movements in the capital markets change the information requirements expected from the financial statements to a great extent today, companies tend to provide more reliable, transparent and quality financial and non-financial information within the framework of corporate transparency. These trends also affect the financial reporting processes especially financial disclosures. The purpose of this study is to evaluate disclosures that are essential to an investor’s understanding and analysis of the economics underlying the information in financial reports. 

Methodology- It focuses on
relationship between financial transparency and key financial ratios. In order
to reach this aim financial transparency and disclosure checklist is
established and companies are classified according to their transparency
levels. Using a sample of publicly traded companies from BIST 100 (excluding
finance sector) for the year 2016, Standard & Poor’s (S&P) methodology
is applied for assessment of financial transparency and disclosure (T&D)
levels based on their annual reports and websites.

Findings- The
results reveal that transparency level has statistical differences among the
group means of some key financial ratios. High
quality disclosure also means more
accountable and transparent companies for investors.   

Conclusion- The study also evaluates
the relationship between the firm-specific T&D scores and financial
performance of BIST 100 firms.  This paper sufficiently
contributes towards literature on financial disclosures. High
quality disclosure has significant influence on investors and lenders who must
assess risks and returns and decide where to place their money best, strengthen
the efficiency of capital allocation as well as offer the benefit of reducing
the costs of capital.

Keywords

Financial statements, financial ratios, financial transparency, disclosure, Borsa Istanbul (BIST) 100

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