A PROPOSED MODEL FOR DETERMINING THE LEVEL OF TRANSPARENCY IN ACCOUNTING DISCLOSURE IN LIGHT OF THE DEGREE COMPLEXITY OF FINANCIAL REPORTS AND ITS IMPACT ON THE EFFICIENCY OF FINANCIAL MARKETS: AN APPLIED STUDY ON A SAMPLE OF BANKS LISTED ON THE IRAQ STOCK EXCHANGE

Abstract

The aim of this research is to propose a statistical model to predict the optimal levels of transparency in accounting disclosure in light of the degree of complexity in financial reports in order to achieve the highest level of financial market efficiency through an optimal balance between the level of transparency in accounting disclosure and the degree of financial reporting complexity, rather than relying on transparency in isolation. The study focuses on a sample of 18 banks listed on the Iraq Stock Exchange over the period 2016-2023, enabling these banks and other stakeholders to estimate the optimal levels of transparency in accounting disclosure and the complexity of financial reports. The independent variable (transparency of accounting disclosure) was measured using the (S&P) index, while the mediating variable (complexity of financial reports) was measured using the quantity of disclosure approach, specifically the number of pages in the published financial reports of the banks in the research sample. The dependent variable (efficiency of financial markets) was measured using four sub-variables: (the ISX60 index, trading volume, number of shares traded, and market capitalization). These sub-variables were based on the annual reports published by the Iraqi Securities Commission, the regulatory body for the Iraq Stock Exchange. To test the research hypotheses, cubic regression analysis was used using two software programs (EasyFit-V. 5.5) and (SPSS V. 27). The research concludes proposing four statistical models to determine the level of transparency in accounting disclosure in light of the complexity of financial reports for the banks in the study sample to achieve the highest level of financial market efficiency. Therefore, Financial market efficiency is achieved through a balance between the transparency of accounting disclosure and the complexity of financial report. The research recommends adopting the proposed models (ISX60, trading volume, number of shares, market capitalization) to achieve the highest level of financial market efficiency through determining the optimal levels of transparency in accounting disclosure in light of the complexity of financial reports by Iraqi banks. Thus, these models combine transparency and complexity (XM) as a diagnostic and predictive tool for evaluating financial market efficiency and can be used to estimate the impact of any change in the level of transparency or complexity before its actual implementation.