Journal of Economic, Finance Research and Review (JEFRR) · Research article · Open access
Financial Reporting Quality and Financial Distress: The Moderating Role of Capital Market Transparency Across Emerging and Developed Markets
Dwi Puji Rahayu, Indrian Supheni, Mohammad Ali Luthfi
8 June 2026 · Vol. 2, Issue 6, pp. 326-333
DOI: 10.65150/EP-jefrr/V2E6/2026-03
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What is this article about?
This study examines whether financial reporting quality (FRQ) reduces the probability of financial distress among publicly listed companies and whether this relationship is moderated by capital market transparency, comparing emerging and developed markets. Drawing on Information Asymmetry Theory and Institutional Theory, we argue that high-quality financial reporting reduces distress risk by mitigating information gaps between managers and external stakeholders, and that this protective effect is amplified in environments with greater market transparency.
Article at a glance
- Published
- 8 June 2026
- Volume / issue / pages
- Vol. 2, Issue 6, pp. 326-333
- ISSN
- 3051-3650 (online) · 3051-3642 (print)
- Licence
- CC BY 4.0 — free to read and reuse with attribution
- Peer review
- Double-blind, at least two independent reviewers
- Publisher
- EP Journals Group
Abstract
This study examines whether financial reporting quality (FRQ) reduces the probability of financial distress among publicly listed companies and whether this relationship is moderated by capital market transparency, comparing emerging and developed markets. Drawing on Information Asymmetry Theory and Institutional Theory, we argue that high-quality financial reporting reduces distress risk by mitigating information gaps between managers and external stakeholders, and that this protective effect is amplified in environments with greater market transparency. Using a cross-country panel of approximately 160,000 firm-year observations from 35 countries over 2010–2023, and employing multiple proxies for both FRQ and financial distress, we find consistent evidence that FRQ significantly reduces financial distress probability across all market types. Crucially, capital market transparency significantly amplifies this relationship, with the moderating effect stronger in emerging markets than in developed markets — a finding robust to instrumental variable estimation and multiple alternative specifications. These results extend the FRQ consequences literature to the financial distress domain and provide actionable evidence for regulators, investors, and corporate managers regarding the institutional prerequisites for financial resilience.
Keywords: Financial Reporting Quality, Financial Distress, Capital Market Transparency, Emerging Markets, Developed Markets, Information Asymmetry, Cross-Country
Cite this article
Dwi Puji Rahayu, Indrian Supheni, & Mohammad Ali Luthfi (2026). Financial Reporting Quality and Financial Distress: The Moderating Role of Capital Market Transparency Across Emerging and Developed Markets. Journal of Economic, Finance Research and Review, 2(6), 326-333. https://doi.org/10.65150/EP-jefrr/V2E6/2026-03
@article{Dwi2026,
title = {Financial Reporting Quality and Financial Distress: The Moderating Role of Capital Market Transparency Across Emerging and Developed Markets},
author = {Dwi Puji Rahayu and Indrian Supheni and Mohammad Ali Luthfi},
journal = {Journal of Economic, Finance Research and Review},
year = {2026},
volume = {2},
number = {6},
pages = {326-333},
doi = {10.65150/EP-jefrr/V2E6/2026-03},
url = {https://doi.org/10.65150/EP-jefrr/V2E6/2026-03}
}Questions about this article
Who wrote this article?
Dwi Puji Rahayu, Indrian Supheni, Mohammad Ali Luthfi.
Where and when was it published?
In Journal of Economic, Finance Research and Review, Volume 2, Issue 6, pages 326-333, published by EP Journals Group on 8 June 2026.
Is this article free to read?
Yes. It is open access under a Creative Commons Attribution 4.0 (CC BY 4.0) licence, so anyone can read, share and reuse it with attribution.
What is the DOI of this article?
10.65150/EP-jefrr/V2E6/2026-03 (https://doi.org/10.65150/EP-jefrr/V2E6/2026-03).
How do I cite this article?
APA: Dwi Puji Rahayu, Indrian Supheni, & Mohammad Ali Luthfi (2026). Financial Reporting Quality and Financial Distress: The Moderating Role of Capital Market Transparency Across Emerging and Developed Markets. Journal of Economic, Finance Research and Review, 2(6), 326-333. https://doi.org/10.65150/EP-jefrr/V2E6/2026-03
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