Abstract
This research aims to relate disclosure quality of published annual reports of listed companies in Khartoum Stock Exchange (KSE) to its hypothesized determinants. Such a relation, if exists, would be used to predict the level (size) and kind (quality) of accounting information disclosure. Annual reports of 42 listed companies in KSE out of 52 total listed companies for the year 2007 were used to assess the quality of disclosure. An unweighted disclosure index of 191 mandatory and voluntary information items was developed and utilized using all disclosure requirements by regulating bodies in Sudan, as well as relevant studies from nine developing countries. Actual degrees of disclosure quality of more than 80% of KSE listed companies were measured and analyzed. Correlation and Pearson Product Moment Correlation Coefficient Model tests were used to check the existence of association between the disclosure quality (the dependent variable) and seven independent variables (assets size, sales value, industry type, firm age, return on assets, liquidity ratio and debt ratio). Statistical analysis showed that disclosure quality was positively correlated to the firm size (measured in assets and sales values), and type of industry (measured in regulated versus non- regulated industry). On the other hand, the quality of disclosure was not significantly correlated to company age (measured in number of listing years), company profitability (measured in rate of return on assets) and company debt level (measured in liquidity and leverage ratios).
Highlights
Firm’s characteristics such as size, type of industry, and performance create the firm image, which is highly affected by and may affect its surrounding environment
Using Pearson correlation analysis, the coefficient of correlation between firm size and disclosure level is found to be 0.531 and the correlation is significant at the 0.01 level, which means that firm size and disclosure level are positively and significantly correlated, and the correlation is strong since the correlation coefficient is more than 0.50
The research has come up with the following findings concerning the effect of the firm characteristics on the degree of disclosure quality: a) There is a positive and significant correlation between the degree of disclosure quality and firm size
Summary
Firm’s characteristics such as size, type of industry, and performance create the firm image, which is highly affected by and may affect its surrounding environment. Based on the arguments of the Agency Theory, a positive effect of profitability on disclosure quality is expected because managers of profitable companies are more likely to disclose high quality information in their annual reports to justify their high salaries and incentives, on one hand, and to signal their superior performance to the market, on the other hand [4]. Liquidity and leverage are assumed to be positively correlated with disclosure quality because companies tend to disclose more information about their performance to satisfy their lendersneeds for adequate and reliable information, and to comply with some covenant terms. Kamran & Kourtis used meta- analysis to integrate 29 studies about corporate disclosure and its association with corporate specific characteristics They confirmed significant and positive relationships between disclosure levels and corporate size, listing status and leverage [5]
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