Transparency of Financial Reporting Before and After the Asian Financial Crisis: An Empirical Study of Indonesian Company Practices

Richard D Morris
The University of New South Wales

Beauty U Ho
The University of New South Wales

Sidney J Gray
The University of New South Wales

Abstract: Indonesia was very badly affected by the Asian financial crisis of 1997. Before the crisis, corporate financial reports in Indonesia, as in other crisis-affected Asian countries, were perceived to lack transparency. Given widespread calls for improvements in financial reporting transparency since 1997, it seems likely that transparency in Indonesian corporate financial reports should have increased as Indonesian companies attempt to regain investor confidence. This study investigates the extent to which this is the case by examining the financial reports of 113 Indonesian companies listed on the Jakarta Stock Exchange. As expected, there is a significant increase in the level of transparency, measured by reference to key items from Indonesian accounting standards, IASs and US GAAP, between 1996 and 2000, though overall levels of transparency are low. Furthermore, higher levels of transparency are positively related to leverage, total holdings of small shareholders, firm size and type of auditor.

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