The role of financial reporting : Perspectives of different actors within the reporting environment of entrepreneurial SMEs

Abstract: In this thesis, the role of entrepreneurial SMEs’ financial reporting is inquired into by posing questions about purposes of use and information needs of users, with the aim of increasing our understanding of what overall objective/s financial reporting can fulfill with respect to this group of entities. The study departs from an interpretivist view and follows a qualitative research strategy with empirical data collected through semi-structured interviews and document studies. The study encompasses the perspectives of different groups of actors within the financial reporting environment of entrepreneurial SMEs, including reporting entities, users and actors engaged in accounting standard setting and regulation.The analysis suggests that the role of entrepreneurial SMEs’ financial reporting is more related to the concept of stewardship/accountability than that of decisionusefulness. Limited support is provided for the relevance of financial reporting information on past performance for users’ predictions about future performance. The study further emphasizes the confirmatory value of financial reporting, which is reinforced by the audits, not only for external users but also for management. While arguments in favour of the importance of reliability in evaluating stewardship/accountability are generally based on agency theory, the results of this study indicate that it is the inherent uncertainties and risks of the entrepreneurial process that call for reliable measures. The study further shows the complexity of the interactive relationships between reporting entities and users. Indications are also provided that the evaluation of accountability/stewardship is not restricted to management’s performance, but that capital providers are concerned about their accountability as well.