Theories of corporate disclosure: A literature review

Abstract

The purpose of this paper is to provide an up-to-date look at the reality of the theories used in disclosure literature, including stakeholder theory, legitimacy theory, agency theory, signaling theory, institutional theory. This study relies on both deductive and inductive approaches to reviewing a group of disclosure literature worldwide and highlighting the theoretical frameworks used. The results showed that the most comprehensive theory is the stakeholder theory, as researchers have adopted it in more than one field of disclosure. The legitimacy theory followed them. Both theories, however, have failed to be consistently supported in the prior studies as it is not expected that companies only want to satisfy stakeholders through disclosure (Al Amosh & Khtaib, 2021b), and legitimizing activities (Pistoni, Songini, & Bavagnoli, 2018) but due to the information asymmetry, firms’ preferences to disclose more information would be different based on their characteristics. Therefore, the theoretical lens of the disclosure literature should be expanded to include multiple theoretical grounds that may lead to a better understanding of the phenomenon of corporate disclosure. This paper contributes to shedding light on the reality of researchers’ interpretation of the detection motives and defining the theoretical perspectives used in preliminary theoretical analysis. Based on the relevant literature on corporate information disclosure, this paper constructs a theoretical framework to integrate the disclosure theory and gives a comprehensive theoretical explanation