Determinants of voluntary disclosure in the annual reports of companies listed at the Nairobi securities exchange
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.