Impact of Changes in Regulatory Framework on Financial Reporting Quality : A Study of S&P CNX Nifty Companies

The quality of information provided in annual reports depends upon many factors. A large number of studies identified various factors that influence Financial Reporting Quality (FRQ) such as ownership structure, financing pattern, domestic and foreign listing of shares, diversity in management, audit committee and board structure. One of the important factors which influence FRQ and has not been explored much in accounting literature is legal and regulatory environment of a country. Very few studies have focused on the impact of legal and regulatory environment on FRQ. This paper is an attempt to examine the impact of change in legal statute on FRQ of Indian companies by examining the annual reports of S&P CNX Nifty companies before and after the enactment of the new Companies Act 2013. The results show that there is no significant improvement in most of the elements in FRQ which may indicate lack of interpretation of new regulations or lack of strict implementation of rules. This may also implicate that policy makers should bring more clarity to current regulations, assigning responsibility to relevant authorities for proper implementation of rules