Measuring the quality of corporate disclosure in less developed countries: The case of Tanzania

Abstract

There have been few previous attempts to measure the quality of corporate financial disclosure in less developed countries. Those that do exist have tended to concentrate on describing and measuring the extent or level of disclosure. It is argued that due to: the lack of a regulatory framework and/or enforcement mechanisms; the absence of a stock exchange, and the shortage of qualified accountants typical of many less developed countries, any measure of corporate disclosure must also consider the timeliness of disclosures and the type of audit opinion received. The quality of disclosure was measured for 51 Tanzanian companies using four measures of disclosure adequacy. The corporate disclosures were generally found to be of a poor quality, with many of the mandatory requirements not being met and reports not being produced within the prescribed time limits. However, it was also found that in most cases, this did not result in a qualified audit report. A positive association was also found between the extent of voluntary disclosure and compliance with mandatory standards, and between the type of audit opinion and the timeliness of the corporate annual reports (CARs).