The Impact of Financial Reporting Quality on the Responsiveness of Stock Prices to Accounting Information: An Applied Study in the Iraq Stock Exchange
Keywords:
financial reporting; stock prices; sensitivity of stock priceAbstract
This study examines the relationship between financial reporting quality and stock price sensitivity to accounting disclosures in the Iraq Stock Exchange (ISX) between 2015 and 2024. Building on market efficiency theories and financial disclosure frameworks, this research addresses how emerging markets anticipate and price new accounting information. An analytical-descriptive method was employed, analyzing 100 semi-annual observations from listed ISX companies using appropriate statistical hypothesis-testing tools. Financial reporting quality showed a statistically significant positive relationship with stock price sensitivity. Higher quality reporting accelerates price adjustments. Firm size had no significant impact, whereas leverage negatively influenced stock price reactions. The findings highlight that increasing transparency, compliance with international standards, and governance mechanisms reduces information asymmetry, enhancing market efficiency and investor confidence. This paper offers original empirical evidence from an emerging market (Iraq), proving that financial reporting quality directly enhances stock price responsiveness and capital market efficiency.
References
Al-Ubaidi, A. A. K. (2021). The Quality of Financial Reporting and its Impact on Investment Decisions. Dar Al-Duktur for Administrative and Economic Sciences.
Arens, A. A., Elder, R. J., & Beasley, M. S. (2020). Auditing and Assurance Services (17th ed.). Pearson Education.
Brealey, R. A., Myers, S. C., & Allen, F. (2022). Principles of Corporate Finance (14th ed.). McGraw-Hill Education.
Brown, S. J., & Warner, J. B. (1985). Using Daily Stock Returns: The Case of Event Studies. Journal of Financial Economics, 14(1), 3–31.
Bushman, R. M., & Smith, A. J. (2001). Financial Accounting Information and Corporate Governance. Journal of Accounting and Economics, 32(1–3), 237–333.
Committee of Sponsoring Organizations of the Treadway Commission (COSO). (2013). Internal Control – Integrated Framework.
Dechow, P. M., Ge, W., & Schrand, C. M. (2022). Understanding Earnings Quality and Financial Reporting. The Accounting Review.
Fama, E. F. (1970). Efficient Capital Markets: A Review of Theory and Empirical Work. The Journal of Finance, 25(2), 383–417.
Fama, E. F. (1991). Efficient Capital Markets II. The Journal of Finance, 46(5), 1575–1617.
Healy, P. M., & Wahlen, J. M. (1999). A Review of the Earnings Management Literature and Its Implications for Standard Setting. Accounting Horizons, 13(4), 365–383.
Jensen, M. C., & Meckling, W. H. (1976). Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure. Journal of Financial Economics, 3(4), 305–360.
Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2020). Intermediate Accounting (17th ed.). Wiley.
Penman, S. H. (2021). Financial Statement Analysis and Security Valuation (6th ed.). McGraw-Hill Education.
Robinson, T. R., Henry, E., Pirie, W. L., & Broihahn, M. A. (2021). International Financial Statement Analysis. CFA Institute Investment Series.
Ross, S. A. (1977). The Determination of Financial Structure: The Incentive-Signaling Approach. Bell Journal of Economics, 8(1), 23–40.
Ross, S. A., Westerfield, R. W., & Jordan, B. D. (2019). Fundamentals of Corporate Finance (12th ed.). McGraw-Hill Education.
Scott, W. R. (2015). Financial Accounting Theory (7th ed.). Pearson Education.
Wahlen, J. M., Baginski, S. P., & Bradshaw, M. T. (2023). Financial Reporting, Financial Statement Analysis and Valuation. Cengage Learning.
Downloads
Published
Issue
Section
License
Copyright (c) 2026 Haider Layedh Meteab
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
The author fully assumes the content originality and the holograph signature makes him responsible in case of trial.
