Financial Disclosure Practices Research Articles

Unraveling the Dynamics: The Impact of Mandatory vs. Voluntary Financial Disclosure Practices on Investment Patterns

Financial disclosure practices play a crucial role in shaping investment patterns and decisions. This research paper delves into the intricate dynamics between mandatory and voluntary financial disclosure practices and their impact on investment behavior. Through a comprehensive review of literature and empirical evidence, this paper examines how different disclosure regimes influence investor confidence, market efficiency, and capital allocation. Furthermore, it explores the implications for regulatory frameworks and provides insights for policymakers, investors, and corporate entities navigating the complexities of financial disclosure

Research on ESG System Construction and Environmental Accounting Information Disclosure：A Case Study of CITIC Securities

Since the signing of the Paris Agreement, societal concern regarding climate change and sustainable development has grown exponentially. The construction of ESG (Environmental, Social, and Governance) frameworks and the disclosure of environmental accounting information have garnered significant attention. Constructing a financial ESG framework and refining its environmental accounting system holds paramount significance. This study employs a case study approach, using leading Chinese securities firm, CITIC Securities, as a focal point. It elucidates the complementary relationship between ESG frameworks and environmental accounting within financial institutions. Leveraging databases and publicly available information such as CITIC Securities' annual reports and corporate social responsibility report, the study systematically analyzes the development of CITIC Securities' ESG framework and the current status of environmental accounting information disclosure. Based on these findings, the study identifies issues in CITIC Securities' and other financial institutions' information disclosure practices, such as a tendency towards one-sided disclosure or the presence of "greenwashing" phenomena. Finally, the study proposes measures and recommendations in four key areas: standardization, enhanced disclosure, independent verification, and digitization empowerment.

“One size doesn't fit all”. Bank switching decisions and customer vulnerability in Europe

PurposeThis paper examines the relationships between bank switching and both customer vulnerability and consumer-oriented policies (financial education and disclosure practices).Design/methodology/approachThe analysis employs microdata from the Special Eurobarometer on Financial Products and Services, for 24 European nations. It carries out a probit estimation on the factors explaining propensity of bank switching, focusing on three characteristics associated with customer vulnerability: an advanced age, low educational attainment and residence in a rural or a relatively poor region.FindingsThe authors report that the probability of bank switching is significantly lower for three groups of vulnerable customers: the elderly, the less educated and those living in deprived regions. Further the authors identify that national financial education policies and disclosure practices have no significant effects on bank switching.Research limitations/implicationsBased on these results, the authors propose more targeted policies recognising customers' heterogeneity are required to increase bank switching behaviour.Originality/valueThis paper exploits a unique source of information on bank switching behaviour and customer characteristics across European nations. These data are complemented with information about consumer financial education policies and disclosure practices from the World Bank and geographical, market and regulatory factors at the regional and national levels. The paper contributes to two academic areas. First, it presents further evidence on heterogeneity of bank customer switching behaviour, addressed at improving the understanding of customer vulnerability in banking services. Second, it examines the efficacy of consumer-oriented policies (financial literacy and disclosure practices) in encouraging bank switching.

The moderating role of board diversity in the nexus between the quality of financial disclosure and dividends in Jordanian-listed banks

PurposeThis study covers all banks listed on the Amman Stock Exchange. It used (1) dividend-paying status, dividend changes and dividend persistence to measure dividend quality, (2) a checklist instrument consisting of 40 items to measure financial disclosure quality, (3) nationality and (4) the percentage of females and males on the board of directors to measure board diversity. Hierarchical regression analysis was employed to investigate the influence of the board diversity on the relationship between financial disclosure quality and dividend quality.Design/methodology/approachThis study investigates the relationship between financial disclosure quality and dividend quality among Jordanian-listed banks. Moreover, it examines the moderating effect of board diversity on the relationship between financial disclosure quality and dividend quality.FindingsThe results in this work imply that banks with high financial disclosure quality have high-quality dividends. Furthermore, nationality and females on the board of directors play a main role as moderators that influence managers' motivations toward the quality of financial disclosure practices and bank dividends. This paper shows that the boards in Jordanian banks have not changed dividend policies and tend to follow a long-term fixed strategy for paying earnings.Originality/valueBecause of the limited number of practical research on the nexus between financial disclosure quality and dividends quality, this study fills a gap in the literature by examining the relationship between them. In addition, a lack of research exists on the effects of board diversity on the nexus of financial disclosure quality and dividends quality. Therefore, this study makes an original contribution to the literature by using nationality and females and males on the board of directors as moderating variables to investigate the effects of board diversity on the relationship between financial disclosure quality and dividend quality among Jordanian banks.

Financial Disclosure Practices of Private Commercial Banks in Bangladesh: A Compliance Study

The study is based on analysis of compliance of prevailing accounting standards for the Private Commercial Banks in Bangladesh. This paper empirically analyzed the performance of disclosure in compliance with IFRS 7. 6 listed private banking companies taken as sample. To fulfil its objective, the annual reports and documents of all the sample banks are examined and obtained data from surveys. Since all of them are required to comply with the standard of IFRS 7 to disclose relevant financial information to uphold the stakeholders’ interest, the extent of deviation from the standards in terms of disclosure practice is also examined. The study found that average compliance of the standards is 72.77% by the banks. The highest rate of compliance found from individual compliance status of those companies is 80% with a negative deviation from average. However, the practices of disclosure in reporting are considerably good. Therefore, it is recommended that the regulatory authority and central bank of Bangladesh should mandate the compliance of IFRS 7 for disclosure in financial reporting.

Critical evaluation of relationship between financial performance and disclosure practices of selected environmental parameters by Indian corporates

Adoption, application and disclosure through reporting of Environmental parameters can facilitate to understand the accountability and responsibility of any corporate entity towards various stakeholders in letter and spirit. This study vehemently asserts that companies that are consistently performing activities for preserving and protecting environment and also disclosing them with transparency are more prone to better financial performance and profitability. This practice helps the company earn the trust of all stakeholders, as such practices help in building organizational reputation and credibility in the market. The direction for further study can encourage researchers for undertaking the analysis of data of Indian corporates falling in environment sensitive categories.

Bank Liquidity Risk: Significance of Financial Disclosure and Governance Practice

The objective of the study is to show the remedial effect of bank liquidity risk in the marketplace by disseminating financial information and practicing corporate governance mechanisms. The link between financial disclosure, corporate governance, and banks' liquidity risk management in Bangladesh is examined in this paper. The study used panel data on 32 commercial banks from the 2008 to 2018 with 346 observations collected from published annual reports. Based on the preliminary diagnosis, the study chose the two-stage least squares (2SLS) regression method to minimize the errors arising from heteroskedasticity, autocorrelation, and endogeneity issues. The study found that adequate financial disclosure and corporate governance practices minimize bank liquidity risk to maintain a stable image in the minds of investors and withstand immense regulatory pressure. To allow banks to detect issues early, they must implement changes quickly and be more robust to crises, thus risk management efficacy and excellent corporate governance implementation are required. Moreover, banks are mainly concerned about liquidity risk as it directly affects the market's performance and stability. Liquidity crises can be eradicated by proper monitoring and providing information pertaining to risks to prudent investors in a reliable and transparent corporate culture.

The determinants of financial risk disclosure in annual reports in emerging economies: Evidence from Egypt

This study aims at investigating the impact of firm and corporate governance determinants on the financial risk disclosure in annual reports. The researcher hypothesized that both the firm characteristics including size, profitability, and leverage and corporate governance characteristics including board size and audit firm size have significant effect on financial risk disclosure. Content analysis was used to analyze the data of 21 non-financial companies listed in Egyptian Stock Exchange during the period 2017-2019. The results of the study indicated that firm size has negative effect on the financial risk disclosure, while leverage and audit firm size positively significantly affect the financial risk disclosure. On the other side, both profitability and board size have no significant effect on the financial risk disclosure. However, this paper has contributed to the prior research by shedding the light on financial risk disclosure practices of Egyptian listed non-financial firms. Finally, the research recommends large Egyptian firms to increase their financial risk disclosure in annual reports to maintain the confidence of investors.

Determinants of Audit Firm Selection Decision: A Qualitative Study of Firms Listed on Pakistani Stock Exchange (PSX)

The objective of this study is to offer detailed and updated overview of the factors perceived by the audit committee members to select external auditors. Moreover, the study aims to explore that what are the main determinants perceived by the clients from their external auditors. Qualitative research design is used, and open-ended interviews has been conducted to explore the phenomena under investigation. The contextual setting of the study is provided by financial firms listed on Pakistan stock exchange (PSX-100). The study finds that management continues to provide input into the selection decision of external auditors because the audit committees view management as an important information source. Audit committee seeks input from management to assess the external audit accessibility, reputation, firm’s industry knowledge and technical expertise. The result of the study suggests that more regulations are required to liable the audit committees for selecting external audit firm. The management input raises the audit risk and mitigate the audit independence. The findings remain robust for audit firms and companies looking for an independent and transparent relationship. Also, the study has implications to build transparent financial disclosure practices. Keywords: Audit Quality, Pakistan Stock Exchange, Clients Perceived Value.

Role of Financial and Non-Financial Information in Shaping Trading Behavior: A Retail Investor’s Perspective

This study aims to examine the role of information disclosure in determining retail investor trading behavior. The approach of the study is deductive, while the quantitative strategy is adopted by using a survey questionnaire for data collection. Primary data was collected from 386 retail investors actively involved in stock trading at Pakistan Stock Exchange (PSX). Theoretical underpinning is based on the signaling theory. Covariance based structural equation modeling (SEM) has carried out to statistically examine the strength of the proposed model.The key findings of this study exhibit that on average, retail investors invest in firms with detailed financial and non-financial disclosures. The result also shows the intervening influence of perceived corporate image on retail investor decisions. Categorically, the finding of this study indicates that improved financial and non-financial disclosure practices support retail Investors to make sound stock investment decisions. The proposed model is novel to insight into the retail investor investment decision in the context of Pakistan.The results should be of interest to firms reporting detail and cohesive non-financial information with the presumption that it is requisite to influence the investor's investment decision making. The result reflects the mismatch between retail Investors' preferences and firm's information reporting practices, which in turn affect their appeal toward investment decisions. This study contributes to the comprehension of the information needs of retail investors and how it hailed their trading behavior. The findings of the study remain robust to firms listed on a stock exchange and retail Investor involved in stock trading.

Moderating Effects of Financial Transparency on Accounting Information’s Transmission to Share Prices: The Case Study of Non-Financial Companies Listed at BRVM

The study of the moderating effect of non-financial companies’ financial transparency on their share values in the context of African stock exchanges is part of a dual perspective. At a first stage, it questions financial theory’s state of art on financial statement disclosure practices of listed companies and their anticipated influence on their shares’ prices. Thereafter, based on the investigation of the specific case of the WAEMU’s Regional capital market (BRVM), a financial place common to eight countries, it highlights the level of transparency in financial communication of companies listed in Africa’s capital market. In doing so, it provides a dual enrichment. First, it highlights the enrichment that researches on Africa’s context can provide to financial theory and its contribution to the reading of African Management practices. In a complementary fashion, it helps to discover the specific practices in Africa and their consequences on market functioning. It also questions the validity of the conclusions drawn from researches made in international environment in the African context.

Financial and Non-Financial Disclosure Practices in Selected Awqaf Institutions

It is undeniable fact that waqf becomes as one of tools used in order to alleviate inequality among people especially Muslim community. Basically, waqf fund is raised from the public and managed by mutawalli under waqf institution. As the intermediate party between waqif and beneficiaries, waqf institution is accountable for the management of waqf funds and need to disclose sufficient information pertaining to waqf fund itself. Good disclosure practices by waqf institution should cover both financial and non-financial information for all related waqf activities, programs and projects conducted. This includes such as corporate information, strategic information, financial performance information, financial statement information and non-financial performance information. To examine such disclosure practices, intensive content analysis was employed on waqf reporting information which is waqf annual report from three selected awqaf institutions namely, Perbadanan Wakaf Selangor (PWS), Pusat Wakaf MAIWP Sdn Bhd (PWM) and Majlis Ugama Islam Singapura (MUIS). The results revealed that financial statement information was the highest disclosure practice by selected awqaf institutions when it scores 100% (385 out of 385 items), followed closely by strategic information 68.9% (62 out of 90 items), financial performance information 66.7% (80 out of 120 items), corporate information 61.7% (74 out of 120 items) and finally by non-financial performance information 37.5% (45 out of 120 items). Besides, several interesting and advanced disclosure practice by MUIS also highlighted and discussed as a benchmark for other awqaf institutions to disclose their waqf activities, programs and projects in the future.

Financial disclosure practices among Malaysian local authorities: a case study

PurposeThe purpose of this paper is to understand and explain the financial disclosure processes among Malaysian local authorities (MLAs).Design/methodology/approachEmploying semi-structured interviews, data were collected from 26 members in five case study organisations, and interpreted using Gibbinset al.(1990, 1992) framework of financial disclosure.FindingsThe study finds that financial disclosure is influenced by a hierarchical structure consisting of accountants, the Financial Accounts Committee, the mayor and other managers. The decision to disclose or not disclose was influenced by how sensitive the issue was. External auditors and mediators influenced both the identification of issues, disclosure position and disclosure output. Though there are many laws governing financial accounting, MLAs opportunistically chose to apply the Federal Treasury Circular largely because the external auditors used it.Research limitations/implicationsThis study contributes to the literature by illuminating who makes disclosure decisions, what influences these decisions and how. The study reveals hitherto un-researched contextual factors that affect disclosure, namely, religion and external auditors and the opportunistic choice of which laws and regulations to apply in financial disclosure. Future studies might want to apply this approach in other contexts to see what we can learn from them.Originality/valueUsing case studies in the study of financial disclosure provided valuable insights into the complex and multi-dimensional phenomenon of financial information disclosure. The application of Gibbinset al.(1990, 1992) framework in the public sector and in Malaysia is novel.

The Impact of Impending Credit Rating Change on Management Earnings Forecast

This study investigates whether impending credit rating changes affect managers’ voluntary financial disclosure behaviors. I find that firms near a credit rating change do not opportunistically alter their financial disclosure practices to manipulate rating agencies’ perceptions of corporate credit risk. In particular, firms close to a credit rating change do not selectively release good news or withhold bad news on their earnings information. Nor do the firms likely issue an optimistically biased forecast or a more precise forecast for good news than for bad news. Overall, there is no evidence suggesting that credit ratings are manipulated via management earnings forecasts.

Is internet reporting useful? Evidence from Egypt

PurposeThe purpose of this paper is to explore the views of 18 users and preparers regarding the corporate internet reporting (CIR) practices of companies listed on the Egyptian Stock Exchange (EGX).Design/methodology/approachA decision-usefulness theoretical framework is used as a lens for the study, in order to shed light on: internet infrastructure and its use for disclosure purposes in Egypt; the benefits of and trends in practices relating to CIR in Egypt; how the information presented accords with the qualitative characteristics of “usefulness” set out in the IASB’s conceptual framework of 2010; and the potential economic consequences of CIR.FindingsThe results indicate reasonable satisfaction with internet infrastructure in Egypt. The interviewees are intensive users of the internet, including accessing electronic sources of corporate information, but the perception remains of hard copy financial reports as the most important source of disclosure. With the exception of verifiability, the majority of respondents viewed CIR as having a (potentially) positive impact on the qualitative characteristics of accounting information as set out in the IASB framework.Research limitations/implicationsThe use of the interview method is subject to some limitations. These include: the perceived lack of anonymity, which may restrict the extent to which participants speak honestly or openly about the topic being investigated; the non-standardisation of responses – which can result in the inability to make systematic generalisations; and interviewees’ perceptions being influenced by events which have taken place prior to the discussion.Practical implicationsThis research provides substantive insights for policy makers about the current attitudes of interested parties concerning CIR in Egypt.Originality/valueThis study contributes to our knowledge in a number of ways, as it provides up-to-date evidence of interested parties’ views concerning CIR practices and it indicates how CIR has affected the quality of financial information disclosure practices. Moreover, this study extends prior research on the use of the internet as a disclosure channel by considering a different empirical site, namely Egypt, and also by adopting a different theoretical framework.

Country- specific characteristics influencing Websites based information disclosure practices

This paper aims to examine and explain the Websites- based financial disclosure practices differences between developed European countries. The development of Internet financial reporting (IFR), as a new corporate reporting practice, was rapidly exploited by large listed companies in the world. A number of accounting research was analyzed the development of online reporting in various countries and they showed that firm specific incentives are the most important factors explaining the IFR practices, however, there was ignored the importance from the politico-socio conditions, as others factors influencing the IFR practices differences (as a accounting practices). As a refinement of Gray (1988)’ framework and an extension of Debrency et al. (2002) model, this study explore an empirical investigation validating the influence of culture, institutional factors on the financial disclosure level through corporate Websites in France, Germany, Italy, Netherlands, Spain and UK. It reveals the importance of technological and media presentation format as Web- based communication index component. The findings showed that environmental factors were significantly related to Websites technology index and economic development is an important factor determining the Websites financial disclosure practices differences.

Online financial disclosures in the Nigerian public sector

The objective of this study is to examine the online financial disclosure practices by Nigerian public sector entities. In achieving this, the cross-sectional research design was employed and data gathered from 27 states for a one year period. The ordered logistic regression technique was used to estimate the model and the findings reveal that wealth and political competition have significant positive relationships with online financial disclosure in Nigeria while the size of the state has a significant but negative relationship. Also, the age of the state has an insignificant relationship with online financial disclosure in Nigeria. Based on these, the study recommends that healthy competition should be encouraged in forms of public debates, assessment polls on public sector entities, frequent programmes aimed at assessing the progress of public entities probably on a yearly basis or biannual or even at the end of a regime (before the commencement of another)

Corporate reporting and disclosures in the emerging capital market of Kuwait: the perceptions of users and preparers

The objective of this paper is to investigate the perceptions of users and preparers regarding financial disclosure practices in annual reports of Kuwaiti listed firms. To measure participants’ views, a questionnaire survey was distributed in Kuwait between October and December 2012, to preparers (financial managers) and users (financial analysts) within Kuwaiti listed companies. The study compares between the perceptions of financial managers and financial analysts regarding disclosing information in corporate annual reports as well as the main obstacles facing the disclosure process and what the problems restricting the use of companies’ annual reports. The study also seeks to investigate whether there is a perceived need for improving the usefulness of Kuwaiti companies’ annual reports for decision-making. The results, based on 137 responses, indicate that accounting practices in Kuwaiti firms are firmly rooted in a decision-usefulness tradition with management and the board of directors viewed as the key audience for reporting information. Indeed, the annual reports of Kuwaiti listed companies are perceived as the most important sources of information. On the whole both users and preparers shared similar concerns regarding the volume of information contained within annual reports; however, their views differed in terms of identifying potential solutions. The results of the study are likely to have implications for decision makers, the academic community and accounting standard setters.

Foreign Ownership and Financial Disclosure in Central and Eastern Europe

AbstractIt is recognized that multinational corporations (MNC) have played a significant role in the recent worldwide accounting reform. This study analyses the influence of foreign ownership, and MNC on financial disclosure practices of listed companies from Central and Eastern European countries (CEE). The possible reverse effect is also considered, and thus, the role of disclosure in attracting foreign investments is investigated. Fixed effects panel analysis has been conducted for 2005-2015 period, in the context of partial IFRS adoption in CEE. Contrary to hypothesized expectations, the influence of foreign ownership on the extent of disclosure is negative. As foreign investors in CEE are dominantly corporations, it seems they impose their own reporting policies or report detailed group information, which may diminish the disclosure of foreign subsidiaries. Moreover, it was found that foreign investors are not sensitive to changes of items in reported information. This evidence raises questions regarding the purpose, and the impact of disclosure on financial markets. Overall, this study gives a signal to standard-setters about reporting practices at regional level, and adds an original empirical contribution to reporting behavior and corporate transparency literature. Moreover, it invites to further research on reporting practices of companies with foreign ownership.

Do compositions of board and audit committee improve financial disclosures?

PurposeThis paper aims to examine the impact of corporate governance practices on the level of financial disclosures made by the Indian firms. This assumes importance in the context of the role of financial disclosures in addressing the agency problem.Design/methodology/approachFinancial disclosure score is computed by considering disclosures provided by the generally accepted accounting principles and is the dependent variable. The independent variable – corporate governance score – is an index comprising internal governance mechanisms. The authors empirically examine the impact of corporate governance practices on financial disclosure using multiple regression model for 200 large listed Indian firms.FindingsThe study suggests that quality of governance practices significantly improves financial disclosure practices of the firm. Particularly, the composition of the audit committee is effective in improving disclosures.Practical implicationsThe finding has implications for policy makers and practitioners. It will help investors, lenders, and other stakeholders to assess firms’ financial disclosure quality. In addition, the findings, suggest the influence of governance practices on disclosure, might help in the formulation of appropriate policies about board structure and audit function. It is also a call to investors to emphasize on governance quality of the investing firms.Originality/valueThe study builds a case for an urgent intervention for improving the existing governance standards to advance the quality of financial disclosure in an emerging market context.