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CHAPTER I

INTRODUCTION
I.1 Research Background
Financial statements reporting is a way to convey information and economic
measurement regarding the resources owned and the performance of a company as an
implementation of accountability to the parties who have interest to the company
(stakeholders). The financial statements of a company would have benefits if delivered
accurately and timely to the users for decision making. According to International
Accounting Standard Board (2008) timeliness of financial statements is the availability
of information needed by decision makers before it losses the capacity to influence
decisions. Since the stakeholders need the information contained in the financial
statements as soon as possible. Therefore, the timeliness of financial statements
reporting will improve decision making and reduce asymmetry in capital market
(Owusu-Ansah and Leventis, 2006).
The timely reporting of financial statements is needed by the investors to do
analysis on the capital that have been invested or will be invested in a company. This
means that the timeliness of financial statements reporting is a factor that will attract the
investors to invest in a company. The company that publish their financial statements
faster than the others will be looked first by the investors. This happen because the
investors want to know the financial information of a company and the financial
statements are the reliable source of information available to them. While the delay of
financial statement reporting will cause a negative reaction from investors.
Timely reporting of financial statement in Indonesia has been regulated by Badan
Pengawas Pasar Modal dan Lembaga Keuangan (Bapepam & LK). Laporan
keuangan tahunan wajib disertai dengan laporan Akuntan dalam rangka audit atas
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laporan keuangan. Laporan keuangan tahunan wajib disampaikan kepada Bapepam


dan LK dan diumumkan kepada masyarakat paling lambat pada akhir bulan ketiga
setelah tanggal laporan keuangan tahunan (Keputusan Ketua Bapepam dan LK No.:
Kep-346/BL/2011). It means that the public company have to submit and publish the
financial statement no later than the end of third months after financial statement date.
The financial statement also have to be accompanied by independent auditors
report/opinion. But in fact, there are companies that late in reporting the financial
statement according to the regulation even though there is sanction to the company who
late in reporting the financial statements (Kep-307/BEJ/07-2004 No. I-H). In 2012,
there are total of 52 companies, in 2013 there are total of 49 companies, and in 2014
there are total of 52 companies that late in reporting their financial statement (based on
the documents released by Indonesia Stock Exchange in their website about the status of
financial statements reporting).
In this research, author is interested in finding out the factors that affecting
timeliness of financial statement reporting of the company listed in IDX especially the
company in LQ45 index. By using the previous research as the reference in conducting
the research, author will use company size, complexity, profitability, solvency, and audit
firm to be discussed as the factor that affecting financial statement reporting timeliness.
Based on the explanation above, the title use for this research is Analysis of Company
Size, Complexity of Operation, Profitability, Solvency, and Audit Firm Size Toward
Timeliness of Financial Statement Reporting for the Companies Listed in LQ45 Index
in Indonesia Stock Exchange For Period 2012 2014.
I.2 Problem Identification and Statement
Financial statement reporting can affect the decision making process of the
financial statement user because the information will be use as the basis to evaluate and
assess the company before making the decision.

However, the information only


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relevant if it is delivered timely. Thus, the timeliness is important for financial statement
to make the information contained relevant. If there is lateness or delay in the
reporting/publication of financial statement, then the information will lose its relevance.
Therefore, the researcher want to focus on researching on the factor that affecting the
timeliness of financial statement reporting.
Based on the explanation above the problem researched can be formulated as
follows:
1. Does company size have impact on the timeliness of financial statement reporting?
2. Does complexity of operation have impact on the timeliness of financial statement
reporting?
3. Does profitability have impact on the timeliness of financial statement reporting?
4. Does solvency have impact on the timeliness of financial statement reporting?
5. Does audit firm size have impact on the timeliness of financial statement reporting?
I.3 Research Scope and Limitation
This research discuss about the timeliness of financial statement reporting in the
company listed in LQ45 index of Indonesia Stock Exchange. The companies that will be
tested only those that consistently listed in LQ45 index for 3 years straight, from 2012,
2013, and 2014. The factor that affecting the timeliness focus only on the company size,
complexity of company, profitability, solvency, and size of audit firm.
1. For the company size, the researcher use total assets of company.
2. For the complexity of operation, the researcher use the number of subsidiaries that
the company have.
3. For the profitability, the researcher use the return on total assets.
4. For the solvency, the researcher use debt to equity
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5. For the audit firm size, the researcher only use Big Four and non Big Four.
I.4 Research Objectives
The researcher intended to achieve these following outcomes:

1. To know the effect of company size to the timeliness of financial statements


reporting

2. To know the effect of complexity of operation to the timeliness of financial


statements reporting
3. To know the effect of profitability to the timeliness of financial statements
reporting
4. To know the effect of solvency to the timeliness of financial statements
reporting
5. To know the effect of audit firm size to the timeliness of financial statements
reporting
I.5 Research Benefit
As for the benefits to be gained for this research:
1. For the researcher:

To gain clear understanding and knowledge on the factor that affecting


timeliness of financial statement reporting

To develop the researchers ability to identify, analyze, and solve


problem, thinking logically, and report the result of research in correct
scientific principle

2. For next research:

As reference materials, to contribute and deliver the knowledge to other


researchers who wish to make research about timeliness of financial
statement reporting.

I.6

Research Method
There are two types of research method that can be used for the researcher,

quantitative research method and qualitative research method. The factor that can be
influence the researcher to choose rather qualitative or quantitative based on the purpose
of the research, source of data that will be used and availability, the size of population,
and the size of sample. The researcher doing in this research is explaining phenomena
then identifying the problem regarding that phenomena and then collecting the data.
Also in this research the researcher choose secondary data. Then, the data collected by
researcher is in the term of number and will be analyzed and process by using Statistic
or using SPSS software. So, the researcher choose quantitative research method as the
method.