Association between firm characteristics and corporate voluntary disclosure: Evidence from Turkish listed companies

Merve Kilic,Ali Uyar,Nizamettin Bayyurt

doi:10.3926/ic.439

Abstract

Purpose: This paper empirically investigates the factors that impact voluntary information disclosure level of Turkish manufacturing companies listed in the Istanbul Stock Exchange (ISE). Design/methodology/approach: The methodology of the study is content analysis of annual reports of the corporations listed on the ISE for the year 2010. Findings: The findings provide evidence of a positive association between voluntary information disclosure level and the variables such as firm size, auditing firm size, proportion of independent directors on the board, institutional/corporate ownership, and corporate governance. However, leverage and ownership diffusion were found to have negative significant association with the extent of voluntary disclosure. The remaining variables, namely, profitability, listing age, and board size were found to be insignificant. Research limitations/implications: Since this study was conducted solely on listed manufacturing companies, the results may not be generalizable to non-listed and non-manufacturing industries. The study has some implications for firms, auditors, investors, and regulators. All these parties play an important role in improving the transparency and disclosure practices of corporations. Originality/value: We extend previous research on the determinants of voluntary information disclosure in the emerging market context.

Highlights

Business organizations have become aware of the importance of presenting information about the broader range of activities including both their financial performance and non-financial performance such as socially responsible performance (Akisik & Gal, 2011)
Mandatory disclosure primarily focuses on presentation of financial statements and their complementary footnotes which are required by regulations and laws, whereas voluntary disclosure allows the management the freedom to choose which information to disclose (Uyar & Kılıç, 2012a)
This study investigates the determinants of voluntary disclosure in an emerging market context, namely Turkey

Summary

Introduction

Business organizations have become aware of the importance of presenting information about the broader range of activities including both their financial performance and non-financial performance such as socially responsible performance (Akisik & Gal, 2011). Greater corporate transparency means decreasing information asymmetry between managers and stakeholders by better information disclosure via various media such as press releases, corporate web sites, prospectuses, and annual reports. Mandatory disclosure primarily focuses on presentation of financial statements and their complementary footnotes which are required by regulations and laws, whereas voluntary disclosure allows the management the freedom to choose which information to disclose (Uyar & Kılıç, 2012a). One of the main rights of investors is to get informed by the companies they invest Because, they are outside the business and they make decision regarding their investments depending on the information disclosed in corporate reports. Firms which have low level of transparency might have difficulty in finding capital to finance its operations or they might incur higher cost of capital (more information Elliott & Jacobson, 1994)

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