The Influence of Firm Characteristics on Financial Reporting Quality: Evidence from Pakistan

Abstract

This study examines the impact of Firm Characteristics (FC) on the Financial Reporting Quality (FRQ) of listed firms in the Pakistan Stock Exchange (PSX). To achieve this objective, the data of 50 non-financial firms is collected for the years 2019-2024. This quantitative study used the balanced panel data to test the hypotheses. Data is collected from the State Bank of Pakistan (SBP) and the published firm’s annual reports. To measure the FRQ, this study used the two-step estimation technique of the modified Jones model, and FC is measured with Firm Size (SIZE), Firm Profitability (PROF), Firm Growth (GROWTH), and Firm Tangibility (TANG). The study finds that SIZE and PROF showed significant negative results, whereas GROWTH and TANG showed positive results with FRQ. These results suggest that larger firms and those with higher profits often exhibit lower transparency and poorer accrual quality. On the other hand, firms with higher GROWTH and TANG have more reliable disclosures, which motivates them to improve their FRQ. Policymakers should make policies accordingly so that management does not manipulate information or act opportunistically. All the variables taken as characteristics of the firm should be encouraged for better disclosures of the firm.