Studies in Developing Countries

The first detailed examinations of users’ views in a developing country context was carried out in Nigeria by Wallace (1988). Wallace investigated the consensus of various users of CARs regarding the importance of a set of information items. Accountants, financial analysts, professionals, managers and investors were asked to attach their views about the importance of 102 information items. The study found that there was a significant difference between professionals, managers and investors on one hand and the accountants on the other. Wallace’s study can be criticised on the ground that it did not indicate for which items the views of the accountants differed from each of the other groups. Ahmed (1988) investigated the role of CARs in investment analysis in Malaysia and evaluated their importance as a source of information for analysts. He found that the most important source of information for investment analysts was the company annual reports. A similar finding was reported by Abdelsalam (1990) in Saudi Arabia when his study found that 67% of investors considered CARs as the most influential source of information for their investment decisions.

Comparative empirical evidence from the Middle-East, particularly from Kuwait and Jordan, was provided by Solas and Ibrahim (1992) who examined the users’ perceptions and views regarding the usefulness and reliability of various financial information items for investment decision making. A questionnaire survey consisting of 23 information items was administrated and sent to individual and institutional investors in Kuwait and Jordan. The study concluded that there was a significant diversity of opinion regarding the perceived usefulness of 10 out of the 23 information items between investors in both countries. In Jordan, another developing country with a reasonably sophisticated capital market, Abu-Nassar and Rutherford (1996) carried out an investigation to view the ways in which users of CARs perceived those reports in terms of their ability to influence their decision making. Abu-Nassar and Rutherford found that most users made at least moderate use of CARs when they made their investment decisions.

In Malaysia, a study was conducted by Rahman (2001) to obtain the perceptions of accountants regarding the primary sources of information and sections of CARs using a questionnaire survey. The author concluded that accountants used annual reports mainly for providing advice to their clients. The study also revealed that advisory services and

annual reports were perceived as the most important sources of information respectively. With regard to the importance of sections of CARs, the profit and loss account was ranked as the most influential section of the annual report. Similarly, in Kuwait, Naser et al. (2003) provided empirical evidence of the use and usefulness of CARs as an important source of information. The authors used a questionnaire survey to investigate the usefulness of CARs to Kuwaiti users and found that the annual reports were considered as the most important source of information followed by information obtained directly from stewardship and advice specialists.

Further empirical evidence was provided by Al-Razeen and Karbhari (2004b) regarding the views of users of CARs in Saudi Arabia. A questionnaire survey was administrated to five target user groups namely: individual investors; institutional investors; creditors; financial analysts and government officials. The authors found that most of the user groups considered the income statement and balance sheet as the most important sections of the annual report, while the cash flow statement was ranked as the least significant. Mirshekary and Saudagaran (2005) conducted a study to investigate the perceptions of seven different user-groups in Iran. Their study reported that as basis for making investment decisions annual reports were regularly used and users relied heavily on information obtained from published annual reports. Mirshekary and Saudagaran (2005) also reported that the income statement was perceived as the most important section of the CARs, while the cash flow statement was the second and the balance sheet was considered as the third most important section.

In Gulf Cooperation Council countries (GCC), Alattar and Al-Khater (2007) and Al-Ajmi (2009) carried out their studies in Qatar and Bahrain respectively. They found that users perceived CARs as the most important source of information for their decision making. In Qatar, user groups perceived all eight sections of the CARs to be significantly important, indicating that these eight sections were equally relevant, with some extra emphasis on the balance sheet as the first section and the income statement as the fourth. In addition, the user groups ranked the audit report as the second most influential section and the statement of cash flow as the third most important section (Alattar & Al-Khater, 2007). In studies such as Al-Hajji (2003), Al-Razeen and Karbhari (2007), Al-Attar and Al-Khater, (2007) and Al-Ajmi, (2009) the board of directors’ report was classified as the least important section of the corporate annual reports. In Jordon, Al Sawalqa (2012) aimed in his study to

provide a comparison between the usage of CARs and other sources of financial information by Jordanian individual investors in the Amman Stock Exchange for their investment decisions. The study found that CARs were perceived as the most influential source of information followed by daily share prices, newspapers, corporate websites, advice from relatives and stockbrokers’ advice respectively.

As can been seen from the findings of previous studies (e. g. Abdelsalam, 1990; Abu- Nassar & Rutherford, 1996; Ahmed, 1988; Al-Ajmi, 2009; Al-Hajji, 2003; Al Sawalqa, 2012; Alattar & Al-Khater, 2007; Alrazeen, 1999; Anderson, 1981; Arnold & Moizer, 1984; Chang & Most, 1981; Day, 1986; Gniewosz, 1990; Mautz, 1968; Meyer & Bernstein, 1982; Mirshekary & Saudagaran, 2005; Naser et al., 2003) CARs were considered as the most important source of financial information. Conversely, other studies reported different findings from the above, where CARs have been considered as a less important source of financial information (e. g. Anderson & Epstein, 1995; Baker & Haslem, 1973; Bartlett & Chandler, 1997). However, Gniewosz (1990) argued that the significance of CARs as a source of information changes over a period of one year depending on its role. It varies from serving as a primarily source of information to a confirmatory role. In addition, he stated that “the annual report also acts as a stimulus for identifying specific questions rather than merely as a source of information in response to prior questions” (p. 223). Regarding the importance of sections of CARs, it has been

agreed by the majority of studies that respondents perceive the income statement and the profit and loss statement followed by the balance sheet as the most important sections of corporate annual reports.