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70Afro-Asian J. Finance and Accounting, Vol. 2, No. 1, 2010Copyright 2010 Inderscience Enterprises Ltd.The perceived importance of electronic sources of financialinformation to individual investors in Egypt: an empirical

investigationAbdelmohsen M. DesokyCollege of Business Administration,University of Bahrain,P.O. Box 32038, Kingdom of BahrainE-mail: [email protected]: This research aims to investigate empirically the perceivedimportance of various sources of financial information in relation to variousinvestment decisions in the market, and to explore how the new source,

electronic sources of financial information (ESFI), stands in relation to them.This study examines the issues from the perspective of individual investors, asa main group of users. Despite the extensive use of ESFI and their websites,especially by individual investors, there has been no research regarding theusefulness of this new source in Egypt. It has been observed that most previousstudies focused predominantly on corporate reports (CR) and other traditionalsources. In order to gather the data needed for testing related hypotheses, twomethods were employed: structured interviews using a questionnaire that wasdelivered to 120 individual investors, and content analysis of ESFI websites.

There was a clear finding that individual investors ranked ESFI as the mostimportant source of information, followed by specialised newspapers andmagazines as second, with CR third in importance.Keywords: corporate reports; CR; electronic sources of financial information;ESFI; internet financial reporting; IFR; internet; Egypt.Reference to this paper should be made as follows: Desoky, A.M. (2010) The

perceived importance of electronic sources of financial information toindividual investors in Egypt: an empirical investigation,Afro-Asian J.

Finance and Accounting, Vol. 2, No. 1, pp.7087.Biographical notes: Abdelmohsen Desoky obtained his PhD in Accountingfrom the University of Hull, England. He is working in the AccountingDepartment, South Valley University, Egypt. Currently, he is an AssistantProfessor of Accounting at University of Bahrain. His research interests includeaccounting disclosure, financial reporting, internet financial reporting andaccounting standard setting.


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1 Introduction and statement of the problem

In Egypt, as in most countries, there are several sources of financial information.Amongthe available sources are corporate reports (CR); specialised newspapers and

magazines;electronic sources of financial information (ESFI); direct contact with thecompany; tipsand rumours; and advisory services. In addition to traditional sources offinancialThe perceived importance of electronic sources of financial information 71information, ESFI are a recent source that supply financial and non-financialinformationabout the Egyptian stock market in general and listed companies in particular.

Most ofthe above sources are frequently investigated in the accounting literature,whether inEgypt (e.g. Desoky, 2004; and Rawy, 2004) or outside (e.g., Epstein and Pava,1993;Anderson and Epstein, 1996; Bartlett and Chandler, 1997). However, it iscritical tore-evaluate the perceived importance of such traditional sources in the light ofthe

existence of the new source, ESFI.The topic of usefulness of financial information sources is at present particularlysignificant in Egypt with regard to the economic changes implemented in thelast twodecades and the contemporary changes in financial reporting practice. Toaccelerate itssteps towards economic reform, the Egyptian government issued a package ofimportantlaws, among them, the Capital Market Law (CML) No. 95 of 1992 issued by the

CapitalMarket Authority (CMA), which was the first comprehensive legislation toregulateEgypts stock market and streamline all pre-existing regulations. This law

presented apackage of disclosure requirements that applied for the first time in Egypt. As a


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consequence of the above wide-ranging changes, the Egyptian stock market hasbeenactivated and users needs for accounting information have rapidly increased.Consequently, accounting disclosure requirements have been changed to meet

theseincreased needs.This research aims to investigate empirically the usefulness of sources offinancialinformation especially ESFI in relation to various investment decisions in themarket.The main aim is broken down into several objectives: to investigate the importance attached to sources of financial information inthe light

of the existence of the new source, ESFI, and explore how this new sourcestands inrelation to other sources; to explore how respondents experience in the market affects their perceptionsof theimportance attached to sources of financial information; to select and examine a set of criteria to be used in the evaluation of ESFI as anewsource.The current research is important since information is essential for thefunctioning of astock market. Financial and non-financial information not only assist inreducinguncertainty in investment decisions, but also improve the market transparency toinvestors and other users of such information. Despite the extensive use of ESFIand theirwebsites especially by individual investors, there has been no research regarding

theusefulness of this new source in Egypt. Most previous studies investigated theimportanceattached to CR and other traditional sources before the existence of ESFI.Furthermore,the study provided insight into the current lack of criteria in website

performance


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measurement, especially ESFI websites.Egypt is the focus of the current study. Egypt, which is an Arabian, Middle-Eastern,and African country, is an important and leading country in the Middle East. It

hastraditionally played an essential role in Middle Eastern politics (Merrill Lynch,1996). Itseconomists and academics have great influence on other countries in whichArabic is themother tongue (Sayigh, 1978). These characteristics give this study a specialimportance,since the results could be applicable to a wide range of countries. Wallace(1988) argued

72A.M. Desokythat the experience of a developing country may assist in clarifying the nature offinancialreporting problems for other developing countries.Furthermore, in 2007, Egypt has been highlighted as the first market in Africa tomarket incentives in relation to foreign direct investment FDI (Ministry ofInvestment,2008). Net FDI inflows increased from USD 509.4 million in 2000/01, to reachUSD 6.1 billion in 2005/06, and USD 13.2 billion in 2007/2008. These

substantiveinflows have elevated Egypt as one of the leading FDI recipient countries of theAfricancontinent and the Arab world (Ministry of Investment, 2008). The Egyptianstockexchange is one of the oldest stock exchanges in the world, and the first one to

beestablished in the Middle East. The Alexandria Stock Exchange was officiallyestablished

in 1888 followed by Cairo in 1903 (National Bank of Egypt, 1992).The current study might provide evidence in two areas. First, the area of sourcesoffinancial information, which might help providers of financial information inimproving


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the current practice. Second, the evidence related to the perception of individualinvestorsregarding each of the ESFI websites investigated in this study may assist both

preparers

and regulators of financial reporting in performing their role. Further, the resultof thisstudy is expected to add value to those who invest in the Egyptian stock market

byobtaining needed information about the listed companies which may help themin makingrational investment decisions. This is especially important since the Egyptiangovernment, in the last two decades, has made a concerted effort to encourageinvestment

by both local and foreign investors.Furthermore, website evaluation, as in the case of most information systems, isanaspect of their development and operation that can help in maximising theexploitation ofinvested resources (Adelman, 1991), and can also significantly contribute totheirdevelopment that serve user needs and meet the user expectations to themaximum

possible extent (Grigoroudis et al., 2006).This paper is structured as follows. Section 2 is devoted to the internet and ESFIinEgypt. Section 3 presents the literature review and hypotheses development.Section 4

presents the methodology. Section 5 contains an analysis of the empiricalfindings.Finally, Section 6 presents the conclusions.2 The internet and ESFI in Egypt

Massive changes initiated by the development and expansion of computerfacilities andinformation technology (IT) have been quite substantial in the last two decades.Thistechnological revolution takes another dimension when linking computer andcommunication industries (Olivier, 2000). The internet is radically changing the


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dissemination and use of all types of information and knowledge resources. Therise ofthe internet is widely acknowledged as a key phenomenon of our times. It is avisible

example of globalisation and the rise of knowledge economies (Halal andTaylor, 1999;IASC, 1999). Individuals use the internet for a wide range of purposes.Accordingly,websites are being developed by organisations for a wide range of activities.The recentrapid developments of the internet and especially the World Wide Web have

provided auser-friendly platform from which companies may, if they choose, communicate

with alarge and growing number of financial information users (Ettredge et al., 2001).These developments have changed the ways that companies relate to theirshareholders, clients, suppliers, institutions, etc. In this respect, the accountingfunctionThe perceived importance of electronic sources of financial information 73has been called upon to play a key role in the use of the new technologies ingeneral, andof the internet in particular, to keep the external users informed of such

information(Bonsn and Escobar, 2006).Access to the internet is growing quickly and the number of users of the internetaround the world has increased tremendously. According to the InternationalTelecommunication Union ITU, the number of internet users was more than1,100 million by the end of 2006 (ITU, 2007). In Egypt, as in other parts of theworld, thenumber of internet users has noticeably increased during the last few years toreach

6 million by the end of 2006, representing 8.4 users per 100 of population and7.3millions by the end of June 2007, representing ten users per 100 (MCIT, 2006).

Nowadays, many companies around the world, regardless of size or othercompany


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characteristics, make a variety of information available to the public throughtheirinternet websites. Indeed, it has been predicted (Elliott, 1994) that the currentlyaccepted

model of financial reporting might be replaced by electronic informationsystems providing financial and non-financial information about companies, notnecessarily in theform of audited financial statements, which would be widely available via theinternet.Under this scenario, decision-makers could decide on the types of informationthat areimportant, and then arrange the information as they see fit.

Several studies have reported increases in the number of companies that use theinternet financial reporting (IFR) (see Petravick and Gillett, 1996; IASC, 1999;FASB,2000; Marston and Polei, 2004). They reported a rapid increase in the use of theIFR.However, the majority of usage was by listed companies in developed countries(e.g.,Craven and Marston, 1999; Bonsn and Escobar, 2006). As Hedlin (1999)noted, this

usage varies between countries, and Asian, African, and South Americancompanies lagbehind North American and European companies in the use of the internet in theprovision of financial and non-financial information. A possible reason behindthisvariation is differences in internet accessibility between developed anddevelopingcountries, or what is called the digital divide (Unerman and Bennett, 2004). Thehuge use

of the internet by listed companies around the world is to be expected in thelight of thegreat potential impact on various groups such as users, auditors and regulators.Therefore,it has been argued that the internet has the power to revolutionise externalreporting


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(Jones and Xiao, 2004).In Egypt, as in other countries, there are several sources of financialinformation.Among the available sources are CR; specialised newspapers and magazines;

ESFI;direct contact with the company; tips and rumours; and advisory services.Taking intoconsideration that one of the most important uses of the internet is the provisionofdifferent information, many ESFI have been founded in Egypt for this purpose.Several advantages and disadvantages of ESFI provision of such informationcan beidentified. For instance, ESFI could assist in solving some of the existing

problems offinancial reporting (such as those related to timeliness, verifiability and thecost/benefit ofinformation). Timeliness can be improved by reducing time needed to distributeinformation and increasing the frequency of disclosure, since the costs formaking suchdisclosures is relatively low. Further, devices such as hyperlinks to multiplesources ofinformation can improve verifiability of information (Debreceny et al., 2002). In

terms ofcost efficiencies, the provision of financial information throughout ESFI mayreduce thecost of publication paid by listed companies. It was argued that the cost of the

productionof reliable information remains. However, at least, the cost of publication issubstantially74A.M. Desokyreduced (Olivier, 2000). Moreover, the financial information provided is flexible

informat because it can be presented by many advanced data presentation methodssuch asaudio, video, graphic and imaging technology. For instance, financialinformation can be


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presented in a number of different forms, including the hypertext mark-uplanguage(HTML), excel, acrobat reader formats (portable document files or PDF),graphics files,

and word documents.ESFI can also make financial information of listed companies more available forawider range of users and may enable them to gather the needed financialinformationregarding many listed companies, sectors of the stock market, and the market ingeneralin seconds and from a single source (one ESFI website). Also, they may helplisted

companies in providing a common level of disclosure to all stakeholders. Thismayreduce the information asymmetry problem among various groups of externalstakeholders. This is now very important in Egypt, especially in the light of thenoticeablegovernmental efforts for more regulation regarding the dissemination offinancialinformation about listed companies. Conversely, ESFI provision of financialinformation

may generate further problems such as those related to information quality andsecurity(Olivier, 2000) and to the audited status of the financial information provided.Most ESFI websites in Egypt focus on the needs of investors and otherstakeholdersand present financial and other corporate information (e.g., digital versions ofthetraditional paper-based CR), press releases, and articles concerning both listedcompanies

and the stock market in general (e.g., www.arabfinance.com;www.egidegypt.com;www.mistnews.com; www.mubasher.net). They provide information free ofchargewith the exception of some providers who require specific fees (paid monthly,quarterly,


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and annually) regarding the additional service provided such as online tradinginformation. ESFI websites vary in several aspects including nature, provider,contents,and type of information presented etc. Therefore, a number of ways can be

applied tocategorise them. For the purpose of this research, they can be categorised asfollows:2.1 Governmental and semi-governmental sourcesThis category of ESFI is established and operated by governmental andsemi-governmental providers such as the CMA cma.org.eg, the EgyptianExchange EGX egyptse.com, Misr for Central Clearing, Depository, and RegistryCompany

(MCDR) mcsd.com.eg. Therefore, information provided is normally free ofcharge andis broadly varied and the language used is Arabic. However, an alternativelanguage(English) is available in most sources. Hypertext links are provided to mostothergovernmental websites. Generally, information provided is in HTML, which isthe

primary format of developing websites.

2.2 Information services sourcesIn contrast to the above, this category of sources is established and operated by

business providers. Most sources in this category are private companies. Some sources(e.g.,egidegypt.com; and mistnews.com) require users to pay a subscription in orderto accessspecific information, especially for immediate access to online tradinginformation.

Information provided may include: market summaries, press releases and reportsaboutEgyptian and other foreign companies, mutual funds, online stock trading data,technicalThe perceived importance of electronic sources of financial information 75


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analysis etc. Other services such as the short message service (SMS) are alsoprovidedby several providers. Most of the information mentioned above is provided inHTML.

2.3 Financial press sourcesThis category of sources is established and operated by press organisations.Information

provided is originally issued in paper-based daily newspapers and weeklyspecialisedmagazines. They are available for users free of charge and provide a variety ofinformation about the Egyptian economy, the stock market, and listedcompanies. Mostof the information provided is also in HTML.

ESFI and their websites should provide useful information for various usergroups.Therefore, in the light of the time and money invested in creating, developingandmaintaining ESFI and their websites, evaluation of their quality and usefulnessis animportant achievement. In this respect, Grigoroudis et al. (2006) argued thatassessmentof website quality has evolved as an important activity. However, evaluating

ESFI andtheir websites is not an easy task, especially in the light of the variation amongthem. Thecurrent study uses an index of criteria to evaluate ESFI websites.3 Literature review and hypotheses development

In the light of the research objectives, related studies can be divided into twocategoriesas follows:3.1 Studies focused on the evaluation of sources of financial information

Frequent contact with users of information sources is needed to assess theirperceptionsregarding the importance attached to CR and other sources and what financialinformation they include. The accounting literature presents many studies on theusefulness of various sources of financial information. However, conflictingevidence has


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been provided.Chang and Most (1985) concluded that individual investors in the US ranked theCRas the most important source of information. On the other hand, individual

investors inthe UK and New Zealand rated specialised newspapers and magazines as themostimportant source, followed by stockbrokers advice and CR as the second andthe thirdsources respectively. Similarly, Epstein and Pava (1993) concluded that CR was

perceived as the most important source of financial information in the USA.Anderson and Epstein (1996) reported that investors in Australia and NewZealand

ranked stockbrokers advice as the most important source for their investmentdecisions;investors in the USA ranked the CR as the most important source for theirinvestmentdecisions. Similar results were reported in Jordan by Abu-Nassar andRutherford (1996),in Saudi Arabia by Al-Razeen (1999), and in Egypt by Desoky (2004) and Rawy(2004)when they concluded that CR were ranked as the most important source of

financialinformation. Further, it was reported that users experience affects theirperceptions onthe importance attached to sources of financial information (Desoky, 2004;Rawy, 2004).Also, Bartlett and Chandler (1997) found that specialised newspapers andmagazineswere the most important source while CR were perceived as the seventh source.76A.M. Desoky3.2 Studies focused on the internet and evaluation of corporate websitesA second category of previous research examines the use of the internet involuntarydisclosure, and evaluates and investigates the differences in the design and/orcontents of


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corporate websites. They select several criteria of internet usage, or aggregatethem intoone or a few main criteria (e.g., Pirchegger and Wagenhofer, 1999; Ettredge etal., 2001,

2002; Debreceny et al., 2002; Grigoroudis et al., 2006; Lee and Kozar, 2006;Bonsn andEscobar, 2006; Welling and White, 2006). The following is a brief review ofsome therelated studies.Pirchegger and Wagenhofer (1999) analysed the use of the internet to providefinancial information by Austrian companies and used four groups of criteria(content,timeliness, technology and user support) to evaluate company websites. From

anotherperspective, Ettredge et al. (2001) investigated the IFR practices and developedameasure of website disclosure level based on points assigned to a list offinancialinformation items that might be found on corporate websites. In Ettredge et al.(2002)investigated the dissemination of information for investors by corporatewebsites. A

range of website characteristics was used to capture the level of informationdisclosed toinvestors at the site. A great deal of variation was found in both the frequencywith whichdifferent items were presented at sites and the number of items presented at anyone site.In another study, Grigoroudis et al. (2006) evaluated websites of threecompanies. Itfocuses on the analysis and assessment of the set of websites features (such as

relevance,usefulness, reliability, specialisation, architecture, navigability... etc.) that affecttheoverall user satisfaction.In a field study, Lee and Kozar (2006) investigated the relative importance inwebsite


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selection of four groups of website quality factors, including 14 sub-factors(such asrelevance, navigability, security, reliability, understandability, responsiveness,

personalisation, and response time). Lastly, Welling and White (2006) examined

thewebsite performance measurement activities of a range of businesses and triedtodetermine whether there are common measures that can be successfully appliedto ratethe performance of Australian corporate websites.In general, the review showed that although the accounting literature (including

previous studies in Egypt) provides extensive evidence regarding CR and othertraditional sources of financial information, no evidence is given in the light of

theexistence of ESFI as a new source of financial information in Egypt. Further,althoughthere are several studies interested in the evaluation of corporate websites, to the

best ofthe researchers knowledge, no evidence is given about the evaluation of ESFIwebsitesespecially in Egypt.In the light of the foregoing discussion, the following research questions were

generated:1 What are the individual investors perceptions of the importance attached tosourcesof financial information and how do the ESFI stand in relation to other sources?2 Are there significant differences in respondents choice of answers on the

perceptions of the importance attached to each source of financial information?3 Does respondents experience in the market affect their perceptions of theimportance attached to each source of financial information?4 How do individual investors evaluate available ESFI in Egypt?The perceived importance of electronic sources of financial information 77Research questions 1 and 4 can be answered by using descriptive statistics whilethe otherresearch questions (nos. 2 and 3) can be answered by testing the following twonullresearch hypotheses:


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H10 There are no significant differences in respondents choice of answers onthe

perceptions of the importance attached to each source of financial information.H20 There are no significant differences among respondent experience groups

regardingthe importance attached to each source of financial information.4 Methodology

To gather the data needed for this survey, two research methods were employed.First,structured interviews were conducted using a purposely designed and pre-testedquestionnaire with closed ended questions. The target population of this surveywasindividual investors in the Egyptian stock market. The inclusion of individual

investors inthe current study is that they are a main group of users of ESFI and the Egyptianstockmarket is mainly dominated by individual investors. The interviews wereconductedduring July and August of 2006. All respondents (individual investors) wereinterviewedface-to-face, and each interview lasted between ten to 20 minutes. It wasdecided to use

structured interviews because they have a high response rate and can be used toobtain alarge amount of supplementary information. For instance, they were asked aboutthe mostused ESFI website in relation to their investment decisions.A total of 120 questionnaires were distributed in the structured interviews to asampleof individual investors. Thirty seven respondents expressed a preference toreturn the

completed questionnaire by mail and a stamped self-addressed envelope wasgiven toeach of them for this purpose. Of the 37, 21 useable questionnaires werereceived,increasing the total number of questionnaires returned to 104. To meet the study


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objectives, the selection of respondents for the structured interviews was based,as far as

possible, upon their awareness of ESFI. Before being chosen for the interview,each

respondent was asked whether or not he or she was aware of ESFI. Only thosewhoexpressed an awareness of ESFI were chosen for the survey. Others, not awareof ESFI,were excluded from the survey as they would not be able to evaluate the service.The first part of the questionnaire was devoted to background questions whilethesecond part was about respondents perceptions concerning the importance ofCR and

other sources of financial information including ESFI in relation to their variousinvestment decisions in the market (question 2.1), and of the 25 criteria selectedto beused in the evaluating of ESFI websites (question 2.2). A five-point responsescale wasused in the second part, with 1 meaning completely unimportant and 5meaning veryimportant.Second, a type of content analysis, using an index of 25 criteria that were

initiallydeveloped based on literature review, discussions with users aware of ESFI, andinvestigation of the available ESFI in Egypt, was carried out for ESFI websites.Theexistence of each of the selected criteria was examined for each website ofselected ESFI.The criteria used are divided into several main groups (see Table 6) including:1 content/financial information and press releases about listed companies;78A.M. Desoky

2 user support and technology3 general criteria.Content analysis has been used in several studies concerning the evaluation ofwebsites(Pirchegger and Wagenhofer, 1999; Perry and Bodkin, 2000). Based on thesurvey


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results, weight was given to each criterion in the selected set of criteria.In addition to ESFI websites used in many brokerage firms in Egypt, a numberof themost popular search engines (e.g., AltaVista, Google, Lycos, and Yahoo) were

used tofind other ESFI websites. They searched on the internet for the homepages ofavailableESFI interested in the Egyptian stock market. Ten websites, representing thosemost used

by individual investors in Egypt and most relevant to the current investigation,werechosen (see Table 7) and then investigated, in October 2006, to see if they metthe criteria

included in the index. This was a sufficient sample to allow detailed analysisand to berepresentative of the ESFI available and used in Egypt.To answer the research questions and to test the research hypotheses, the dataanalysiswas carried out on two different levels: first, for the overall sample; second, forsub-groups constructed according to respondents experience in the market. Thestatistical package for social sciences (SPSS) was used to analyse the surveydata. In

addition to the descriptive statistics, a statistical analysis will be presented usingsomenon-parametric tests such as the Chi-square Test and the Wilcoxon Mann-Whitney Test.

Non-parametric techniques are ideal for data that is measured on nominal andordinalscales (the case of the current survey), and useful when data does not meet thestringentassumptions of the parametric techniques (Sekaran, 2000; Pallant, 2001).5 The empirical findings5.1 The importance attached to sources of financial informationAs shown in Table 1, according to the mean score of each source, clearly,respondents asa whole ranked ESFI as the most important source (a mean score of 4.46 withthe


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lowest standard deviation of 0.501, which indicates the level of agreement as totheimportance of such source). The reason behind that may be that in Egypt now, incontrast

with several years ago, there are several important ESFI websites which mightmeetvarious information needs of individual investors. These websites areincreasingly used

by individual investors in the Egyptian stock market. This high usage may comefromtheir being an easy and very low cost source of information and may reflect thehighacceptance of these sources by individual investors. Although, ESFI were

ranked themost important source, they faced some criticisms by users. For example, someinvestorscomplained that the use of such websites may mislead them through presentinginformation that gives a wrong impression about a specific company, sector, orthemarket in general.The second most important source was Specialised newspapers andmagazines, with

a mean of 4.27 and standard deviation of 0.740. This may be because in Egyptnow, incontrast to a decade ago, there are several important specialised magazines andnewspapers.CR, which were perceived as the most important source in several previousstudies(e.g., Epstein and Pava, 1993; Al-Razeen, 1999, Desoky, 2004; Rawy, 2004),wereThe perceived importance of electronic sources of financial information 79

ranked third in importance (a mean score of 4.17 with a standard deviation of0.717),suggesting a relatively low level of importance given to CR by individualinvestors.Advisory services were ranked fourth and The direct contact with thecompany as the


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fifth in importance. The last source was tips and rumours.Table 1Importance of sources of financial information (the overall sample)Sources Mean Std. D. Ranking1 CR 4.17 .717 3

2 Specialised newspapers and magazines 4.27 .740 23 ESFI 4.46 .501 14 Direct contact with the company 3.81 .871 55 Advisory services 3.99 .940 46 Tips and rumours 3.11 1.023 6In the light of the above results, the answer to the related research question(question 1),is that ESFI were ranked as the most important among the various sources offinancial

information by the overall sample. To test for significant differences inrespondentsperceptions, the chi-square for one sample test was used. It was used to know ifany onechoice of answer was favoured significantly more than the others. Table 2 belowrevealsthe results of this test.Table 2Chi-square results for importance of sources of accounting information(the overall

sample)Sources Mean Std. D. Ranking1 CR 12.365 2 .0022 Specialised newspapers and magazines 62.923 3 .0003 ESFI .615 1 .4334 Direct contact with the company 44.846 3 .0005 Advisory services 21.923 3 .0006 Tips and rumours 42.250 4 .000As all values of chi-square, with the exception of ESFI (0.433), were

significant(p < 0.05), it is possible to say that respondents answers were not equallydistributedamong the different levels of perceptions of the importance of each of thesources of


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financial information, except for ESFI. Therefore, the null hypothesis H10should berejected for all the sources with the exception of ESFI and the alternativehypothesis

should be accepted. Consequently, the answer to question 2 is that there aresignificantdifferences for all sources of financial information except ESFI.5.2 Effect of background variable (experience)Aiming to examine whether respondents experience affects their perceptions,their

perceptions on the various sources of financial information will be analysed inrelation totheir experience, classified as group 1, individual investors with less than ten

years ofexperience in the market, and group 2, individual investors of ten years andabove.Because the Egyptian stock market has undergone major changes, during thelast decade,80A.M. Desokythat have affected the needs of financial information by various user groups ingeneraland investors in particular, it was decided to use the same period (ten years) as

anappropriate break point between experience groups 1 and 2.Table 3 below clearly reveals, according to the mean of each source, that thetwogroups correspondingly ranked ESFI, specialised newspapers and magazines,andtips and rumours as the first, second, and sixth most important sourcesrespectively.Moreover, other sources, such as CR and direct contact with the company,

wereranked nearly similarly by the two groups.Table 3 Importance of sources of financial information respondent groups(years of experience)Sources Mean Std. D. Rank1 CR 4.14 .687 4


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2 Specialised newspapers and magazines 4.27 .802 23 ESFI 4.48 .504 14 Direct contact with the company 3.73 .840 55 Advisory services 4.16 .877 3L

ess than ten years6 Tips and rumours 3.02 1.000 6

1 CR 4.23 .768 32 Specialised newspapers and magazines 4.28 .640 23 ESFI 4.43 .501 14 Direct contact with the company 3.93 .917 45 Advisory services 3.73 .987 5Ten years and above

6 Tips and rumours 3.25 1.056 6

The results of the Mann-Whitney test, used to find out whether there aredifferences between two groups, are reported in Table 4 below. The table indicates thatthere are nostatistically significant differences, as all probability values are non-significant(p > 0.05),

between the two groups for all sources with the exception of advisory services,whichhas a significant probability value (p < 0.05). Therefore, it is possible to accept

the nullhypothesis H20 for all sources with the exception of Advisory services and thealternative hypothesis should be rejected. Therefore, the answer to question no.3 is thatrespondents experience in the market does not affect their perceptions of theimportanceattached to all sources of financial information, with the exception of advisoryservices.Table 4Mann-Whitney test results of difference among groups (experience)Sources Mann-Whitney U Wilcoxon W Z Asymp. Sig.(2-tailed)1 CR 1,185.500 3,265.500 685 .4942 Specialised newspapers andmagazines1,234.000 2,054.000 339 .735


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3 ESFI 1,204.000 2,024.000 588 .5564 Direct contact with thecompany1,110.500 3,190.500 .237 .216

5 Advisory services 954.000 1,774.000 .293 .0226 Tips and rumours 1,113.000 3,193.000 .168 .243The perceived importance of electronic sources of financial information 815.3 Comparing the results with the results of other studiesIn general, Table 5 below shows that findings of the current research areconsistent withthose of previous studies. For example, the results show that Specialisednewspapers andmagazines, which were perceived as an important source in previous studies,

were givennearly the same rating in the current research. Further, CR was perceived asthe mostimportant source in several studies (Epstein and Pava, 1993; Abu-Nassar andRutherford,1996; Anderson and Epstein, 1996; Al-Razeen, 1999; Desoky, 2004; Rawy,2004), butthey were perceived as less important (third) in the current research.Furthermore, it is

possible to conclude that a noticeable improvement in other available sources offinancialinformation in Egypt such as ESFI and Specialised newspapers andmagazines mightaffect the importance attached to CR by individual investors.Table 5Comparing findings with other related studies

Anderson andEpstein 1996 (4)

Sources

Epstein and Pava 1993 (3)USA

Abu-Nassar and Rutherford1996 (1) Jordan

USAAustralia


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New Z.

Bartlett and Chandler 1997(5) UK

Alrazeen 1999 (1) KSA

Desoky 2004 (2) EgyptRawy 2004 (2) EgyptThe current research (1)

1 CR 1 1 1 3 3 7 1 1 1 32 Specialisednewspapersandmagazines3 8 3 2 2 1 5 2 3 2

3 ESFI - - - - - - - - - 14 Direct contactwith thecompany- 4 - - - - 3 3 2 55 Advisoryservices3 - 3 4 4 - 4 6 4 46 Tips and

rumours- 7 - - - - 8 5 7 6 Notes: (1) Ranking of the mean value; (2) ranking of the percentages and themean value;(3) rank based on the percentages; (4) rank based on the percentages of userswho

base their decision on one of the sources; and (5) rank based on the percentagesofusers who read sources thoroughly.5.4 Evaluating the ESFIIn this study, 25 criteria were selected to be used in the evaluation of ESFIwebsites inEgypt. Table 8, below, reveals the mean score for each criterion. Notsurprisingly, some


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criteria were perceived as more important criteria, while others were perceivedasmoderate or less important. For instance, criterion no. 7, online tradinginformation,

82A.M. Desokywas perceived as the most important criterion with a mean score of 4.80 and astandarddeviation of .510. This means that most individual investors are interested in thistype ofinformation being available in the ESFI websites. For this reason, almost all

brokeragefirms in Egypt are equipped with halls that offering online share tradinginformation for

their customers (individual investors) during trading hours. Other criteria (nos.11, 6, 10,1 and 3) were perceived as the second, third, fourth, fifth, and sixth inimportance withmean scores of 4.77, 4.65, 4.62, 4.59, and 4.54 respectively.Surprisingly, the auditor report (no. 2), which should increase the level ofconfidence that users have in financial statements, was not among the five mostimportantcriteria as it was ranked 11th in importance. Criteria 14, 22, 24, 21, and 25 were

perceived as the 21st, 22nd, 23rd, 24th, and 25th (the last) criteria in importancewithmean scores of 2.95, 2.47, 2.39, 2.31, and 1.94 respectively. For instance,criterionno. 14, Additional language in the website, received a low mean score of 2.95.Thereason behind this might be because most surveyed individual investors wereEgyptianswhose mother tongue was Arabic, while foreign investors deal directly from

abroad withEgyptian institutional agents.In evaluating ESFI websites, a weighted index was utilised and the mean scoreforeach criterion listed in Table 6 above were assigned a weight that best capturedthe


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relative importance of the criteria measured. To develop an aggregated weightedscorefor each website of ESFI, 0 was assigned to each non fulfilled criterion, whilethe related

mean score of each fulfilled criterion was assigned. Therefore, the aggregatedweightedscore can be interpreted as the total mean scores of the fulfilment of the criteria.Accordingly, the aggregated weighted score for each website is expected to liein therange between zero (none of the 25 criteria was fulfilled) and 98.91 (all of the25 criteriawere fulfilled). The greater the value of the score, the higher the ranking of theESFI

website evaluated. To obtain the information required for the evaluation, theweb page ofeach selected ESFI was visited and analysed. The collection of data was

performedduring a period of one month (October 2006).Table 7 below contains the scores of each elected ESFI website. The scoresdiffergreatly for the different sources in general as well as within each single group,with the

exception of group C. For instance, in the first group, egyptse. com obtainedthe highestscore of 65.02 points out of a maximum score of 98.91 points, representingabout 66%and then was ranked as the first, followed by cma.org.eg with a score of 28.99

pointsand mcsd.com.eg with a score of 20.97 points as the second and thirdrespectively. Thisresult suggests that both the CMA and MCSD need to improve their websites,

especiallyas most of the information needed by individual investors is already availablefor the two

providers. In contrast to the other websites in the group, cma.org.eg is the onlywebsite


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that provides a large volume of important information about the Egyptianregulatoryenvironment (e.g., regulatory procedures, Egyptian Accounting Standards, theCompanies Act, and the CML).

Regarding group B, the scores also differ greatly within the group. Figures inTable 7show that website 5, mubasher.net, obtained the highest score of 88.11 of themaximumscore representing about 89% and therefore is ranked most important website toinvestigate within the group. This source offers, in the same website, identicalservice for9 other Arabian stock markets in eight Arabian countries. Furthermore, it is theonly

website that presents the full version of financial statements including theauditor report(criterion no. 2) and the notes to the accounts section (criterion no. 3) in PDFfiles for themost active companies.The perceived importance of electronic sources of financial information 83Table 6 Results of evaluating criteria of the ESFIGroups ofcriteria Criteria Mean Std. D. Ranking

1 The financial statements 4.59 .617 52 The auditor report 4.46 .682 113 The notes to the accounts section 4.54 .723 64 Version of most recent interim reports 4.48 .724 105 Financial statements of previous years 4.28 .794 156 Daily and up-to-date share prices 4.65 .498 37 Online trading information 4.80 .510 18 Historical share prices 4.49 .557 99 Share price and/or indices graphing

facility4.52 .682 810 Financial analysis reports 4.62 .628 411 Press releases about listed companies 4.77 .446 212 Historical search facilities for pressreleases


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data.84A.M. DesokyTable 7 Evaluation of ESFI in EgyptGroup A2 Group B Group C

Criteria11 2 3 1 2 3 4 5 1 21 x3 x x x x x x2 x x x x x x x x x3 x x x x x x x x x4 x x x x x x x5 x x x x x x x6 x x x7 x x x x

8 x x x x9 x x x x10 x x x x x 11 x x 12 x x x 13 x x x x x14 x x x x15 x x x x x x16 x x x x x

17 x x x x x x x x18 x x x x19 x x x x x20 x x x x x x x x21 22 x x x x x x x x23 x x x x x x x24 x x x x x x25 x x x x x x x

Total4 28.99 65.02 20.97 71.71 58.96 36.85 56.41 88.11 11.47 16.09Rank 15 2 1 3 2 3 5 4 1 2 1Rank 2 7 3 8 2 4 6 5 1 10 96 Conclusions

The main aim of this study was to investigate empirically the usefulness ofsources of


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financial information especially ESFI as a new source in Egypt and to select andexaminea set of criteria to be used in the evaluation of ESFI. Based on the data analysis

presented

earlier, there was a clear finding that respondents as a whole ranked ESFI as themostimportant source of information followed by specialised newspapers andmagazines assecond, with CR third in importance. Results of the statistical analysis indicatedthat thereThe perceived importance of electronic sources of financial information 85are significant differences for all sources of financial information except ESFI.Also,

respondents experience in the market did not affect their perceptions of theimportanceattached to all sources of financial information with the exception of Advisoryservices.Regarding the evaluation of ESFI websites, there was an obvious finding thatthe scoresdiffer greatly for the different sources in general as well as within each singlegroup withthe exception of group C.

There are several limitations related to this study. First, the number ofrespondents participating in this research survey was only 120, so generalisations will bedrawn fromonly those respondents and only ten ESFI websites were investigated. Thesemay notrepresent all of the possible ESFI websites. Second, the study focuses on service

providedfree of charge by ESFI. Third, websites of stock market forums that came out in

the lastfew years, and are developed and managed by individuals, are outside the scopeof thestudy. Fourth, as a result of the dynamic development of the internet, thefindings of this


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study offer only a snapshot of ESFI websites whose content and layout may bechangedwithout notice. To achieve a high degree of temporal comparability, theempirical

research was performed in a short time period of one month (October 2006).This paper makes some contributions. First, and most importantly, unlikepreviousresearch, which investigated user perceptions of CR in the light of othertraditionalsources of financial information, the current study extended this work byincluding newsources of financial information, such as ESFI. This was the first time that ESFIhad been

investigated in Egypt. Second, the evidence in the area of different sources offinancialinformation, including ESFI, as a new source might help providers and standardsetters inimproving the current practice of financial reporting. Lastly, website evaluationmaycontribute to their development that serve user needs and meet the userexpectations tothe maximum possible extent.

The current study suggests that private ESFI could provide CR in PDF format oranyother format, in their free of charge services to be available for various users.Furthermore, governmental ESFI, especially egyptse.com and cma.org. e.g.should

provide CR of listed companies in their websites especially that such reports arealreadyavailable, according to listing rules and CML no. 95 of 1992, to the EGX andthe CMA.

The following are some suggestions for future research, for which the currentstudy

provides a basis. First, as the present study concentrates on the free of chargeESFIservices, it would be interesting to conduct similar studies on the other services(paid


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services). Second, because the Egyptian stock market was the focus of thisstudy, itwould be interesting to duplicate it in other Arab countries or to do acomparative study,

so that comparisons could be drawn, especially as these Arab countries havemanysimilarities to the Egyptian environment, such as emerging stock markets and

privatisation programmes. Finally, as the current research was directed towardsindividual investors in Egypt, further evidence could be obtained in other studiesfromother user groups that were outside the scope of this study.Acknowledgements

The author is very grateful for the helpful comments given by the Editors of

Afro-Asian Journal of Finance and Accounting and Professor Alan Dunk on an earlierversion ofthis paper. Also, Ms. Evelenagh Maguire for her work on proofreading the

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