Firm-Specific Characteristics, Corporate Governance and Voluntary Disclosure in Annual Reports of Bangladesh

Abstract

This study is on “Firm-Specific Characteristics, Corporate Governance and Voluntary Disclosure in Annual Reports of Bangladesh”. The aim of the study is to examine the factors influences voluntary disclosures of information in the annual reports of listed companies in Dhaka Stock Exchange (DSE) over the period of 2007 to 2011. The data were obtained from both primary (interview findings) and secondary sources (annual reports). Qualitative and quantitative data were collected from examination of annual reports using the voluntary disclosure checklist and also through administering semi-structured questionnaire. A sample of 106 non-financial companies listed on Dhaka Stock Exchange (DSE) was selected by judgmental sampling. This research is also carried out by using un-weighted index to measure the level of voluntary disclosure. The study uses univariate and multivariate analysis to examine the association of firm specific characteristics and corporate governance factors with the level of voluntary disclosure in the annual reports of listed non-financial companies in Bangladesh. In the regression model, corporate voluntary disclosure score was the dependent variable, while the firm specific characteristics (total assets, total sales, return on asset and return on sales) and corporate governance factors (the percentage of female directors, the percentage of independent directors, board leadership structure, board size and ownership structure) were the independent variables. Firstly, the results of the disclosure index indicate that four highest disclosure scorer listed companies in DSE are from the industrial categories of “Fuel & Power” and “Pharmaceuticals & Chemicals” and four lowest disclosure scorer listed companies in DSE are from the industrial category of “Food & Allied”. Secondly, the results of measuring voluntary disclosure score indicate that the average level of voluntary disclosure is 42.85% for the whole sample companies from 2007 to 2011.The results from the trend of voluntary disclosure score indicate that the average voluntary disclosure items of the listed companies are 41.13% in the year 2007, 41.87% in 2008; 42.78 % in 2009; 43.8% in 2010 and 44.69% in 2011. In aggregate, the voluntary disclosure items have been increasing gradually over the period. Thirdly, the results indicate that the total assets, the percentage of female directors, board leadership structure of a firm are positively associated with the level of voluntary disclosure. The result also indicates that the percentage of equity owned by the insiders (top level management) of a firm is negatively associated with the level of voluntary disclosures. Fourthly, findings of the opinion survey show that respondents’ perception is satisfactory on most of the aspects of corporate voluntary information comprised in corporate annual reports in Bangladesh and respondents’ perception is dissatisfactory on some aspects of corporate voluntary information comprised in corporate annual reports in Bangladesh Generally, the findings of this study contribute to the literature by providing empirical evidence on corporate voluntary disclosure practices by listed companies in Bangladesh. Results from statistical analysis, together with perceptions of the respondents, provide a better understanding of corporate voluntary disclosure practices in Bangladesh. Therefore, the findings of this study have important implications for regulatory authority, enforcement agencies such as ICMAB, ICAB, SEC, DSE, policy makers, shareholders and others who have interest in corporate voluntary disclosure.