Electronic copy available at: http://ssrn.com/abstract=1283343 Working Paper October 2008 HOW TIMELY IS FINANCIAL REPORTING IN CHINA? AN EMPIRICAL STUDY Robert W. McGee, Florida International University Xiaoli Yuan, California State University, East Bay Key Words: timeliness, financial reporting, China, corporate governance ABSTRACT Timeliness of financial reporting is one of the attributes of good corporate governance identified by the OECD and World Bank. Shareholders and other stakeholders need information while it is still fresh and the more time that passes between year-end and disclosure, the more stale the information becomes and the less value it has. This paper examines the timeliness of financial reporting in the People’s Republic of China. The timeliness of financial reporting was measured by counting the number of days that elapsed between year-end and the date of the independent auditor’s report for a number of Chinese companies. Those results were then compared to data of non-Chinese companies in developed market economies to determine whether there was a significant difference. This study also examines which independent audit firms issued the audit opinion to determine which audit firms dominate. INTRODUCTION Transparency is a very important component of financial reporting. Companies must disclose anything that might influence the investment decision of an informed investor. Nothing of consequence may be hidden. This rule is widespread and pervasive. Stock exchanges require it. Government agencies require it. Various accounting rulemaking bodies require it, including the Financial Accounting Standards Board in the United States and the International Accounting Standards Board. One aspect of transparency is timeliness. Generally speaking it is better to disclose information sooner rather than later, although there are some tradeoffs. For example, companies that issue their annual reports on January 1 are extremely timely but there is a certain probability that some of the information in that report is not as complete or accurate as would be the case if the company had spent more time preparing the statements and had issued them a few weeks or months later. There is an inverse relationship between the quality of financial information and