Measuring Financial and Disclosure Quality for a Sample of Algerian Banks (2018–2025): An Empirical Study Using the Standard & Poor’s Disclosure Index

Abstract

This empirical inquiry investigates and measures disclosure quality within the Financial Reporting Quality (FRQ) framework in the Algerian banking sector over an eight-year observation window (2018–2025). The analysis evaluates a cross-sectional sample of four major commercial financial institutions that represent the core structural pillars of the national banking architecture and hold over 80% of national banking assets: two private Islamic commercial banks (Al Baraka Bank Algeria and Al Salam Bank Algeria) and two state-owned public commercial banks (Banque Nationale d'Algérie [BNA] and Crédit Populaire d'Algérie [CPA]). Using the Standard & Poor’s (S&P) Disclosure Index—comprising 83 comprehensive items structured across ownership structure, financial and non-financial information transparency, and board of directors governance—the research applies an unweighted binary disclosure scoring methodology rather than treating the index as a direct, comprehensive proxy for all quantitative and qualitative dimensions of financial reporting quality. The findings reveal a pronounced structural bifurcation in reporting transparency: private Islamic commercial banks achieved 'Low Compliance' scores (50.60%–53.01%), whereas state-owned public commercial banks demonstrated a 'Significant Disclosure Gap' with scores below 28% (26.50%–27.71%), underscoring pronounced cross-sectional differences across ownership types. Furthermore, the study identifies a total qualitative disclosure vacuum (0.00% compliance) for critical non-financial performance metrics, specifically employee satisfaction and market competition intensity. The research concludes that, despite the mandatory statutory implementation of the Financial Accounting System (SCF) harmonized with IAS/IFRS under Law 07-11, actual public banking disclosures remain suboptimal. Urgent regulatory modernizations by the Bank of Algeria and the Banking Commission are imperative to establish mandatory baseline disclosure standards, enforce qualitative reporting compliance, and enhance market transparency.