Impact of cost stickiness on financial disclosure quality: A study in the Saudi Arabian context

Abstract

The study examines the association between the disclosure quality and cost stickiness in the Saudi Arabian context. The influence of accounting information on the decisions of different stakeholders gives a clear idea of the importance of this accounting information and its reporting. Annual accounting reports form the final stage of the disclosure process. Moreover, the recognition of different types of costs is an important issue in cost and management accounting. Submitting quality annual reports has always been an interesting concern to different stakeholders of a company. The study sample consists of 102 companies listed on the Saudi Stock Exchange Tadawul between 2009 and 2018. The study uses pooled OLS to investigate the association between financial disclosure and cost stickiness. The relationship of financial reporting quality with the cost of goods sold is negative, positive with the sales cost, and positive and insignificant with administrative costs. The study concludes that variables related to sticky costs affect financial quality disclosures. The impact of sticky cost variables on the quality of disclosures is different due to the transition policies adopted by the Saudi Arabian economy.