ABSTRACT : This study investigates the extent to which information disclosed in corporate financial reports supports investor decision-making in Sri Lanka. Drawing on decision-usefulness and information asymmetry perspectives, the research develops and empirically validates a construct to capture the relevance of financial reporting from investors' perspectives. Using a quantitative, user-focused approach, primary data were obtained from active investors with accounting knowledge and analysed through Exploratory Factor Analysis, Confirmatory Factor Analysis, and Partial Least Squares Structural Equation Modelling. The results reveal that relevance is represented by six distinct information categories: forward-looking disclosures, cash flow information, segmental reporting, risk-related disclosures, fair value measurement information, and capital structure details, operationalised through twenty-eight validated indicators. Reliability and validity assessments confirm the soundness of the proposed measurement model. Further analysis demonstrates that the relevance of financial information exerts a strong and statistically significant influence on the decision-usefulness of annual reports, accounting for a substantial proportion of variation in investors’ decisions. The findings provide empirical evidence that financial reports remain an important input for investment decisions in Sri Lanka and highlight the importance of enhancing relevant disclosures to improve the practical value of financial reporting in emerging capital markets.
Karunananda et al. (Mon,) studied this question.