On the Determinants of Voluntary Disclosure by Indian Companies

Abstract

In the current scenario of financial reporting regime, investors are increasingly looking at the disclosure practices of companies. The companies also face capital market pressures and need to disclose more than the regulatory norms. There could be several motivations for the companies to disclose more information voluntarily. This article explores the factors that determine the voluntary disclosure choices of the non-financial companies listed in the National Stock Exchange (NSE). The study uses a voluntary disclosure index (VDI) constructed by the authors with 81 financial and non-financial items across different categories such as strategy, forward looking, environment and social, etc. With the VDI, this study measures the voluntary disclosure levels for four financial years from 2009-2010 to 2012-2013 using the content analysis methodology. The study uses a panel data model to analyse the effects of three categories of variables, namely, firm characteristics, profitability and governance and found the fixed effect model to be suitable and leverage, size and institutional ownership emerged as the determinants of voluntary disclosures. The article is one of the first studies to use longitudinal data and a disclosure index specific to the Indian context.

Evaluation of Return on Assets on Market Capitalization of Quoted Construction/Real Estate and Conglomerate Companies in Nigeria

“…Dainelli, Bini, and Giunta (2013) assert that the purpose of signalling can be seen as a value adder to firms by way of releasing signals to its investors compared to the conduct when two parties have access to different information, and the theory explains the information asymmetry between parties, which can be reduced through signalling. Charumathi and Ramesh (2015) corroborated the fact in their study which elucidate differences in corporate sustainable performance disclosure of companies in the literature. This study aligns with this opinion because signalling theory is the firm's signal through accounting information, to influence investors with the aim of lowering the required rate of return.…”

The Extent and Determinants of Voluntary Disclosures in Annual Reports: Evidence from Banking and Finance Companies in Sri Lanka

“…Voluntary disclosure index is developed, based on the indexes adopted and developed by Bhasin et.al. 2012;Ismail and El-Shaib 2012;Al-Shammari 2013;Haji and Ghazail 2013;Ho andTaylor 2013 andCharumathi andRamesh 2015. Therefore the items are added based on those studies to provide empirical support of the index and each element is checked to eliminate the mandatory disclosures from the index. By considering all items are equally important this study used unweighted approach to score the items in disclosure index 1989;Hossain et.al., 1994;Wallace et al, 1994;Naser et.al.…”

“…1995;Inchausti, 1997;Naser et.al. 2002;Gul and Leung 2004;Leventis and Weetman, 2004;Barako et.al 2006;Huafang and Jianguo 2007;Abdullah and Ku Ismal 2008;Iatridis and Alexakis, 2012;Charumathi and Ramesh 2015 attempt to identify the determinants of voluntary disclosures in various countries and in various industries.…”

“…According to the agency theory, the disclosure by the companies tends to reduce the information asymmetry between external stakeholders and management. The management acts as agents to shareholders and the management is expected to act in the best interest of the shareholders and inform the shareholders through proper disclosures, the absence of which would increase the agency costs in the form of litigations and auditing expense (Charumathi and Ramesh 2015). Therefore one of the reason to have agency cost is imperfect information available to shareholders which do not adequate to make proper decisions.…”

“…Therefore companies disclose voluntary information in excess of the mandatory information. Organizations who disclose more information have opportunity to obtain some benefits such as lower capital costs, gain investor confidence, and improve marketability of their shares (Meek et al, 1995, Kristandl andBontis, 2007) and Corporate disclosure is vital for the users of financial statements in order to make informed decisions on the valuation and investment (Iatridis and Alexakis, 2012;Charumathi and Ramesh 2015). Further voluntary disclosures is a device which reduce the information gap in between insiders and the stakeholders.…”