The determinants of voluntary financial disclosure by Swiss listed companies: a comment

Abstract

The purpose of this commentary is to examine two important issues in theliterature on voluntary disclosure using Raffoumier's (1995) study as ademonstration model. The first issue relates to the use of the political costsargument in support of a positive influence of firm size on voluntarydisclosure. The second is about the selection of voluntary items for inclusionin a disclosure index.In his article appearing in this journal, Raffoumier (1995) related theextent of voluntary disclosure in the annual reports of Geneva StockExchange listed companies to possible determinants representing agency andpolitical costs. He measured the voluntary disclosure practices of the firms inhis sample with a disclosure index. The index consisted of items requiredunder the Fourth and Seventh European Union (EU) directives. Usingunivariate and multiple regression analyses, he examined the relationshipsbetween the index scores and eight corporate attributes. Among other thingshe concluded that, '. .. even if size is highly correlated with other variables,its impact on the extent of disclosure should mainly be attributed to politicalcosts' (Raffoumier, 1995: 276).This commentary is an attempt to draw the attention of other disclosureresearchers to these issues so that the research design in voluntary disclosurestudies can be made more rigorous. The rest of the commentary is organizedas follows. The next section presents discussion on the relationships betweenpolitical costs, firm size and voluntary disclosure. The third section examinesthe selection of voluntary disclosure items. The final section contains theconcluding remarks.Address for correspondence:School of Accounting & Finance, Middlesex University Business School, TheBurroughs, London NW4 4BT.© 1997 European Accounting Association 0963-8180