The Extent of the Effect of Voluntary Disclosure on the Firm Performance

Abstract

Progressively, there is a growing public awareness of corporate activities throughout developing and less developed nations in respect of voluntary disclosure and firm performance. As a corollary, investigations on voluntary disclosure and firm performance which include features of corporate governance as well as shareholder and stakeholder views provide insights for authorities, particularly in developing nations engaging in the worldwide industries. Thereby, this paper investigates the determinants and effects of voluntary disclosures in Egypt during the period of 2014 till 2020. We chose this significant time period because 2014 was one of EGX’s most years of success, since it required all listed Egyptian firms to implement and adopt the mechanisms of corporate governance. It also suggests that voluntary disclosure can generally boost the firm performance, in which, this provides an incentive for the company to increase openness through voluntary disclosure. Thereon, three key categories are employed as proxies for sustainability and transparency: social, environmental, and intellectual capital. The investigation of this paper thusly is concentrated on the impact of these disclosures on the overall firm performance. Accordingly, the average voluntary disclosure index is used to assess voluntary disclosure, which is regarded as an independent variable. Also, the analysis includes the following control variables: Firm Size, Leverage (S.T.D), Leverage (L.T.D), and Industry. While, the dependent variable is firm performance, which is quantified using five dimensions: ROA, ROS, Market Cap, Earnings per share, and Tobin’s Q. Besides, EViews-version 10 was used to collect and analyze data for 46 companies from 2014 to 2020. Therefore, the findings show that the ROA, Market Cap, and Tobin’s Q have a significant relationship with an average voluntary disclosure; on the other side, ROS and EPS demonstrate an insignificant relationship with an average voluntary disclosure.