Information Content of Financial Reporting and the development of interactive capability with stakeholders: Pygmalion Theory Test

Confidence in the capital market becomes dynamically valuable when interactive strategies with stakeholders are formulated for the long term to reduce the information asymmetry that has become an epidemic among companies. That is, a more responsive response to the level of expectations of this market under the supervision of relevant institutions. By reflecting on timely news content and honestly speaking, one can expect interactive functions and capabilities between companies with stakeholders in the form of theories such as Pygmalion theory that points to the re-formation of expectations in this market. It should be strengthened and the level of satisfaction with investing in this market will increase due to lower risk and higher return. The purpose of this research is Information Content of Financial Reporting and the development of interactive capability with stakeholders by Pygmalion Theory Test. In this study, in order to measure the content of financial reporting information, two criteria of timeliness and Reporting-Lag have been used. To evaluate the development of interactive capability with stakeholders, Delphi's analysis based on Likert-5 formulation has been used. Questionnaire for collecting research data for 142 companies in year 2019 was sent out of which 105 questionnaires were returned with the participation of managers of Tehran Stock Exchange. In order to fit and test the hypothesis, we used the partial least squares analysis. The results showed that Information Content of Financial Reporting had a positive and significant effect on development of interactive capability with stakeholders.