Transparency of Financial Reporting in Serbia – Regulatory Framework and Reporting Practices

The objective of this paper is to examine the legal framework for financial reporting and reporting practices in the Republic of Serbia as one of the European transitional economies where financial reporting environment and accounting legislation have been changing rapidly in the last decade. It is a great challenge for the Serbian public companies to offer reliable and high quality accounting information in order to attract external sources of finance, particularly from foreign investors. Transparency and reliability of financial reporting has been and still is a severe problem in Serbia. This study contributes to the existing literature by examining financial reporting transparency in transitional economies and especially by focusing on the extent to which the stage of capital market development affects the quality and quantity of financial reporting. Our study covers listed companies on the Serbian regulated market during the period from 2008 to 2011, thus showing that the practice of financial reporting is primarily determined by the needs of illiquid and thin capital market.