Financial Reporting Quality as a Driver for Accessing External Financing

Abstract

Within the financial market of the Republic of Moldova, which is heavily dominated by the banking sector in the absence of a fully developed capital market, the informational gap between companies and creditors represents a major structural obstacle to securing external financing. This research employs a methodology based on qualitative synthesis and a critical-comparative analysis of national and international literature, evaluating the transmission channels of agency theory (adverse selection and moral hazard) in correlation with financial reporting regimes. The findings reveal that the credit market in the Republic of Moldova remains constrained by the paradigm of asset-based lending (collateral-driven), a direct response to the opacity and formalism of financial statements prepared under National Accounting Standards (NAS). However, the analyzed evidence demonstrates that the transition to IFRS acts as a catalyst for enhancing Financial Reporting Quality (FRQ), providing superior predictability of cash flows and enabling a shift toward modern bank screening models (centered on IRR and financial performance). The study concludes that mere regulatory compliance is insufficient; optimizing FRQ through IFRS adoption, accounting digitalization, and the reinforcement of auditing stands as vital strategic tools for improving credit ratings and unlocking external financing for SMEs. UDC: 339.727.22:[005.336.3:657.37](478); JEL: M40, G10