Determinants of voluntary disclosure in the annual reports of companies listed at the Nairobi securities exchange
Abstract
Financial reporting and disclosures by management are the primary methods of keeping
investors informed about corporate performance. To date, there is very little supporting
empirical evidence about the impact of firm specific-attributes such as size, age,
profitability, leverage, ownership structure on the extent of annual voluntary disclosure.
However, the empirical evidence from previous studies was conflicting and not conclusive.
The objective of the study was to determine whether the extent of voluntary information
disclosure is associated with the Nairobi Securities Exchange listed firm-specific
characteristics. The study was based on descriptive statistic design. The target population for
this research comprised of the 62 companies listed at the Nairobi Securities Exchange as at
December 31, 2012. This study comprises of a sample of 31 listed firms. The data was
collected through developing a voluntary disclosure index consisting of 47 disclosure items
and the scores were used to measure the voluntary information disclosed. Data was mainly
collected from the publicly available information as the published annual reports of a sample
of 31 from 62 listed firms at the NSE. The data collected was for a period of one year, the
year 2012. The collected secondary data was analyzed using Statistical Package for Social
Science (SPSS) version 20. The multivariate OLS model with robust standard errors was
used in this study to test the simultaneous effect of six firm attributes on the extent of overall
voluntary disclosure, and to determine which of the six independent variables was
significant in explaining the variations in the voluntary disclosure levels among NSE listed
firms. The study revealed that diffuse share ownership was significant for voluntary
disclosures and that existed a positive association between diffuse ownership and the extent
of voluntary disclosure. The study concluded that the presence of an external auditor type,
firm‟s level of leverage measured by debt to asset ratio and age of the firm were also key
variables that influence the voluntary release of annual reports‟ information. The study
concluded that there existed a positive significant relationship between firms profitability
measured by ROE and voluntary disclosure of financial information. The study concluded
that companies‟ size measured by natural logarithm of the total assets was statistically
related to the level of voluntary disclosure by the sample of companies in their annual
reports. The findings of this study will help Kenyan regulators to fine-tune the country‟s
regulatory policies to better suit the needs of the financial market. The study recommends
that companies should focus on higher ranking auditors to audit company annual reports.
The auditor type is employed as a signal to the market.
Citation
School of Business,Publisher
University of Nairobi
Description
Thesis