Determinants of corporate voluntary disclosure in a transition economy

Abstract

Corporate voluntary disclosure becomes a burning issue in the literature of accounting throughout the last two decades. The study aims to explore the most crucial determinants that influence corporate voluntary disclosure in a transition economy. A cross-sectional study based on the pharmaceutical and chemical companies listed in the Dhaka Stock Exchange is conducted to reconnoiter the crucial determinants affecting the voluntary disclosure. Based on the agency theory, stakeholder theory, and previous literature, the determinants are selected. An unweighted disclosure index is used to measure the extent of voluntary disclosure; after that, a multivariate analysis is steered to reconnoiter the key determinants of voluntary disclosure. It is found that firm leverage and firm liquidity are the key determinants that significantly influence the corporate voluntary disclosure in a transition economy. In contrast, no significant positive association is found between voluntary disclosure and board size. In additon, it is also found that market category significantly influences voluntary disclosure with an inverse direction. This study has important implications for both the corporate people and the regulatory bodies of the transition economy. The study also helps various stakeholders of the transition economy – Bangladesh, in designing their strategies regarding the most significant determinants of voluntary disclosure. Acknowledgment We are very thankful to the Institute of Advanced Research (IAR), United International University, Bangladesh, to grant us the fund by mobilizing which we generate our required data for the study and complete this empirical study.

Determinants of Firm-Level Voluntary Corporate Disclosure in Emerging Markets: A Meta-Regression Analysis

“…Even the largest publicly traded firms in these countries adopted the appearance of corporate governance mechanisms from developed economies, but these mechanisms rarely functioned like their counterparts in developed economies (Elkhishin & Mohieldin, 2020). This resulted in informal institutions, such as relational ties, business groups, family connections, and government contacts, all playing a greater role in shaping corporate governance and its disclosure in emerging countries (Masum, Latiff & Osman, 2020).…”

“…For example, Foyeke, Odianonsen, & Aanu (2015) argue that whether a company is highly indebted or not, will not change its attitude towards voluntary corporate discourse. Nevertheless, some few studies have concluded that leverage plays a significant role in voluntary corporate disclosure in emerging countries (Masum et. al., 2020).…”

The impact of gender diversity on digital reporting in the USA

“…A disclosure index can be scored in two ways: weighted and unweighted. Previous studies on corporate disclosure have commonly used the unweighted approach (Aly et al, 2010;Lipunga, 2014;Masum et al, 2021). Proponents of this approach argue that its superiority derives from the fact that it avoids the issue of subjective bias by giving equal importance to all items.…”

Corporate governance, capital structure, and firm performance: a panel VAR approach

“…CS can influence CG levels through enhanced compliance with the CG Code and more corporate disclosures. According to Jensen and Meckling ( 1976 ) and Masum et al ( 2020 ), firms with high debt are prone to report additional information to satisfy the requests of external capital providers and alleviate borrowers’ concerns about the possibility of transferring resources from debt holders to managers and shareholders. Again, agency theory shows a robust correlation between a company’s CS and disclosure (Jensen and Meckling 1976 ), because the existence of debt holders in a company’s leverage (particularly in highly geared businesses) intensifies agency problems (and hence increases monitoring costs), which aims to decrease these costs by revealing additional information in their annual reports.…”

“…The CGI is calculated by adding these values to each company annually. Given that when the index has a large number of items and both weighted and unweighted indices’ scores produce similar results (Chow and Wong-Boren, 1987 ; Sharma, 2014 ), an unweighted index is used to evaluate disclosure levels as per previous studies (Cunha and Rodrigues 2018 ; Masum et al 2020 ). Furthermore, the unweighted approach gives each disclosure item in the annual report equal weighting and is best suited to resolve the problem of subjectivity bias (Healy and Palepu 2001 ).…”