Evolutions in the Financial Reporting Quality: A Comparative Analysis of Romanian Companies Listed on the Bucharest Stock Exchange

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Abstract
The permanent evolution of accounting and financial reporting standards, in particular for listed companies, is justified by the need to adapt these standards to economic, societal, financial, institutional and technological developments. The main objective of the standard setters is that the financial statements reflect as closely as possible the reality of the entities they describe. The Romanian financial market (Bucharest Stock Exchange—BSE) has two segments: the regulated market, where, since 2012, IFRS are mandatory for the individual financial statements, and the alternative market AeRo, where the Romanian standards (RAS) are applied. This structure allows us to compare a financial reporting quality (FRQ) score, first, longitudinally (IFRS period 2012–2023 vs. non-IFRS period 2000–2011, for companies listed on the regulated market) and, second, IFRS observations (regulated market) vs. RAS observations (alternative market), for the same period (2012–2023). Following and partially replicating a methodology found in the literature, this study found that FRQ scores over the analyzed periods show us an increase in FRQ in the case of IFRS application, but also a favorable evolution of FRQ score for RAS observation. The evolution of accounting rules (including the transition from RAS to IFRS) is important, but the enforcement of the application of the reporting standards and other factors could have a significant impact on the quality of financial reporting.

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