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Management and Administrative Sciences Review ISSN: 2308-1368 Volume: 2, Issue: 2, Pages: 181-195 © 2013 Academy of Business & Scientific Research  Research Paper Determinants of Voluntary Disclosure in Annual Report: A Case Study of Pakistan Najm-Ul-Sehar1, Bilal2*, and Sumaira Tufail3 1, 2, & Hailey College of Commerce, University of the Punjab Lahore, Pakistan This study investigates the factors affecting voluntary disclosures in the annual reports of listed companies in Karachi stock exchange (KSE) of Pakistan The degree of voluntary disclosure is calculated by an index which is based on financial, non-financial and strategic information For exploring determinants of voluntary information latest data of 372 manufacturing companies of Pakistan in 2012 is collected Most recommended cross sectional data analysis techniques multiple regression analysis was used in this study In order to obtained robust results of regression analysis, diagnostic tests were applied These tests check the assumptions of multi-collinearty and heteroskdasticity in regression analysis The finding of this study shows that firm characteristics; profitability, firm size, age and auditor size have positive and significant relationship with voluntary disclosure while leverage has negative and significant relationship with voluntary disclosure According to author’s knowledge, this study is conducted first time in Pakistan to explore the determinants of voluntary disclosure This study can be very helpful for the shareholders, financial management and creditors in making decisions about giving voluntary disclosure in annual reports as it provides adequate information for decision making Keywords: voluntary disclosure; Pakistan; annual reports; firm characteristics; manufacturing firms; INTRODUCTION Increasingly, researchers are taking interest in voluntary disclose of financial, non-financial and strategic information in annual reports of a company Several studies have been conducted in this respect in developing (Ferguson, Lam, & Lee, 2002; Mohammed Hossain, 2008; Mohammed Hossain & Reaz, 2007) as well as in advance countries (Bradbury, 1992; Mahmud Hossain, Perera, & Rahman, 2007; Raffournier, 1995) However, very little work has been done on voluntary disclosure of firm’s in Asian countries (Chau & Gray, 2002; Eng & Mak, 2003; Haniffa & Cooke, 2002; Ho & Shun Wong, 2001; Ibrahim & Haron, 2000) Voluntary disclosure in annual reports depicts free choices for firm management to provide information about its financial, nonfinancial and strategic operations, to satisfy the investors to regarding investment decisions The published annual report is the most important medium for a listed company to disclose information voluntarily because it is widely circulated and attract the more investors to take *Corresponding author: Bilal, Hailey College of Commerce, University of the Punjab, Lahore, Pakistan E-Mail: bilalsharif313@gmail.com 181 Voluntary Disclosure in Annual Report investment decisions Annual report is less rigid in format and provide adequate information to reader to approach the management's reporting philosophy (Stanga, 1976) There are various objectives due to which mostly firms are interested in the voluntary disclosure of the information It is essential for the accountants and users of the financial statements to understand that why firms voluntary disclose information about their operations (Buzby, 1975; Meek, Roberts, & Gray, 1995) Financials managers in business firms want to have a sound disclosure policy to access the paybacks for running of business operations e-g adequate disclosure results in better relationship between business firm and audited firms Stanga (1976) claimed that analysts have incredible effect in investment market, which build the investors’ confidence to make the investment decisions The greater extent of disclosure may well in escalating the investors' confidence and also enhancing the efficiency of capital markets (Caruana, 2003) Datar, Feltham, and Hughes (1991) rationally exhibited that the selection of an auditor is the indication to the market that quality of a firm’s disclosure is adequate On the other side, as the information in financial statements provides access to investors to evaluate risk which is inherent in investment decision If the investors found that they will get some adequate return on their investment then it built confidence in investors for making investment decisions These decisions bring huge amount of capital for enterprise for running of the business operations and increase the market price of firm’s stock which carries profit for both its owners and management Management’s decision about whether to disclose information or not is also based on weighing expected costs and benefits of making the information public (Frolov, 2007) Information disclosure is wanted in a social context (Diamond, 2012; Frolov, 2007) The cost benefits analysis may direct to limited or no disclosure, therefore one must inquire about the disclosure should be voluntary or mandatory (Mohammed Hossain, 2008) In addition, this study also taking into account the three types of information for the voluntary disclosure i-e financial, non-financial and strategic information Literature provides the evidence that financial and strategic type of Research Paper information of enterprises is helpful for the investors for making investment decisions (Tonkin, 1989) Investors may get the base to evaluate return on investment and forecast risk associated with their investment fund While third type non-financial information in annual report is providing the disclosure regarding social responsibility It is intended for a broader group of stakeholders other than the owners or investors (Meek et al., 1995) Pakistan’s society is not a democratic society However, in democratic society, there exists a more demand to voluntary disclose firm private information because all the people which have direct or indirect relation with that firm are more interested to quantify their risk So the companies in Pakistan not disclose according to the users requirements due to the ineffective implementation of the disclosure laws and the lack of business ethics Now awareness to disclose relevant information about company operations is rapidly increasing in Pakistan because disclosure has proven that it improves the image of the firm and also results in the long term success of firm To fulfill the market information needs i-e to know about the corporate private activities and to enhance transparency, now more people are interested in the expansion of traditional financial reporting requirements (Beattie, 1999; Lev & Zarowin, 1999; Upton, 2001) In this respect, generally accepted accounting principles (GAAP) are the international financial reporting standards that help accountants to disclose relevant private information about activities of company It also increase the usefulness and understandability of the financial statements by providing uniform practices A regulatory authority for disclosure, which is Corporate Law Authority (CLA) in case of Pakistan, gives guidelines for disclosure of company information which are listed in stock exchange The firm-specific characteristics are most important which are taken into account in this research Several researchers provided the evidence that in various national studies that variety of firm-specific characteristics have a significant relationship with the level of voluntary 182 Manag Adm Sci Rev ISSN: 2308-1368 Volume: 2, Issue: 2, Pages: 181-195 disclosure in advance and emerging markets (Buzby, 1975; Chow & Wong-Boren, 1987; Terence E Cooke, 1989; Terry E Cooke, 1991; Ho & Shun Wong, 2001; Raffournier, 1995).The rationale of this research is to investigate the relationship between firm-specific characteristics (firm size, audit size, firm age, leverage, profitability and sector type) and voluntary disclosure of companies listed in KSE of Pakistan This study shows a significant contribution to literature in the context of Pakistan According to the best knowledge of researchers, there is no single study present in Pakistan which explored this area So, for the first time, researchers explore the determinants of voluntary disclosure in annual reports of listed manufacturing companies in Pakistan Rest of the study comprises of four portions In first portion, review of literature is given In second portion, Research methodology of this study is discussed In third section, Empirical finding and discussion is explained Last portion concludes the study REVIEW OF LITERATURE In literature several researchers have investigated determinants of voluntary disclosure all over the globe (F D Choi, 1973; Chow & Wong-Boren, 1987; Depoers, 2000; Healy & Palepu, 2001; Leftwich, Watts, & Zimmerman, 1981; Smith & Warner, 1979) Existing literature shows that there is a close relationship between Jensen and Meckling (1976) ―Agency theory‖ and the determinants of voluntary disclosure Agency theory claimed that goals of the owner and agent should not be in contradiction which bears agency cost; also the owner and agent must tolerate for risk together Fama and Jensen (1983) state that there will be the greater agency cost if shareholders are separated from the decisionmaking function in the company In the same way, if firm shares are widely held by management then there is more separation exists between owner and agent and raises the issue of greater agency costs and information asymmetry Information asymmetry is a situation in which one party possesses more information than other All the market participants not have access of information they require for their investment decision This will cause inefficient decision making e-g management is more aware about the company activities and decisions than the shareholders It is the main hurdle to allocate the resources effectively in a capital market economy Healy and Palepu (2001) describe that entrepreneurs typically have enhanced information than investors about the value of business and investment opportunities Therefore, investors bears information asymmetry problem when they want to take an investment decision On the other hand, if the investor took the decision of investment in business ventures, management have an incentive to confiscate their savings which resulting in agency problem Voluntary disclosure can be used to reduce the problem of information asymmetry for investors (Grossman, 1981; Spence, 1973) Researchers claimed that disclosure of relevant information about firm helps to decrease the level of information asymmetry which gives them signal of increased quality of its operations as compared to rivals (Akerlof, 1970; Jensen & Meckling, 1976) Providing voluntary disclosure also helps to reduce agency problem and makes the economy more efficient Disclosure means to disclose important information of firm operations by annual reports, news releases, and conference calls with auditors to the general public to raise firm capital Disclosure increase access of information to gain the investors savings and make the effective capital markets operations which result in greater involvement of borrowers and investors (F D Choi, 1973) Lang and Lundholm (1993) argued that there are various ways by which improved disclosure brings benefit for the firm These benefits are mainly; minimize agency cost, compensation and debt agreements between firm owners and management These agreements mostly require management to disclose private information regarding the firm ongoing strategic, financial and non-financial operations As well as for future forecast which make investors to keep a careful check that contractual terms are fulfilled both by owner and management This will facilitates the investors to evaluate that management is working in the best interests of investors One most preferable way to reduce Najm-Ul-Sehar et al Voluntary Disclosure in Annual Report agency cost is hiring of information intermediaries like financial auditors that are involves in the production of information for investors to show that how firm resources are managed for investor’s best interest (Healy & Palepu, 2001) Empirical evidence provides that corporate disclosure is of two types’ mandatory disclosure and voluntary disclosure Financial reporting standards (FRS) are required to disclose relevant information which is mandatory Combination of GAAP and International Financial Reporting Standards (IFRS) comes corporate transparency to disclosed information relevant to the financial operations of firm, to help investors for taking decisions regarding investments (Jacob & Madu, 2004) Corporate transparency provides the view of accessibility to external investors and stakeholders regarding company specific information which further helps them for making decisions of resource allocation (Bushman, Piotroski, & Smith, 2004) Literature provides fewer evidences about determinants of voluntary disclosure regarding why firms are more interested to providing additional information about firm operations by their own will instead of providing information mandatorily in emerging markets Healy and Palepu (2001) claimed that today accounting researchers are taking more interest in voluntary disclosures of firm’s information in annual reports in developing countries Decisions about additional reporting requirements depends upon the extent of disclosure practices (Meek & Gray, 1989) Voluntary disclosures means to disclose additional relevant information other than requirements, depicts more ways for company management to disclose accounting and strategic information in firm’s annual reports which is helpful for employees, investors, auditors and customers (Meek et al., 1995) Companies disclose private information after cost benefit analysis when they expect that benefits of voluntary disclosure (reduction in the agency cost and information asymmetry) are more than direct and indirect costs related to the disclosure (Ferguson et al., 2002) Disadvantages of voluntary disclosure are in the form of cost e-g there is a risk of disclosing information because it can be access Research Paper by rivals resulting in financially deterioration of the company (Depoers, 2000) Voluntary disclosure decisions are quite difficult and inclined by various national and commercial factors F D S Choi, Frost, and Meek (2002) argued that country's fundamental characteristics, such as its macroeconomic, socio-historical, cultural, and legal environment has an impact on corporate financial reporting in both accounting measures and disclosure perspectives This will provide the information regarding determinants of voluntary disclosure across various markets in which firm operate There are various variables that may explain voluntary disclosure but here researcher has explored the impact of most important companyspecific characteristics (firm size, audit size, firm age, leverage, profitability and sector type) on the extent of voluntary disclosure in case of Pakistan This section explores the relationship of each variable with level of voluntary disclosure Firm Size In literature Jensen and Meckling (1976) claimed that agency costs for big firms are greater than small because there is extensive network of management operations and decisions These firms are more capable to afford cost incurred in the preparation of annual reports to reduce agency cost Big firms have more subsidiaries and operations thus managers possess extensive information about companies operations which result in information asymmetry Due to the regular interaction of larger firms with financial society, so they are more aware about the needs of outside owners (Stanga, 1976) Watts and Zimmerman (1986) explored the relationship between firm size and firm’s political cost They found positive relationship; if firm size is increase then political cost will also increase Skinner (1994) argued that larger firms have many reasons of more disclosure due to potential litigation costs and net disclosure-related costs Managers in larger firms are encouraged by the owners to disclose bad news to avoid legal actions for inadequate disclosure Big size firms voluntarily disclose more private information to 184 Manag Adm Sci Rev ISSN: 2308-1368 Volume: 2, Issue: 2, Pages: 181-195 increase the firm value because investors see nondisclosure as bad news or risk for making investment (Lang & Lundholm, 1993; McKinnon & Dalimunthe, 1993) firm then there is more transparency of information Firm’s strategies are improved due to this which results in reducing the conflict of interest between firm owner and management There is more disclosure of information by big firms to avoid these costs There is a large number of Individual and institutional shareholders in larger firms which may cause information asymmetry problem So, providing more voluntary disclosure by larger firms overcome these problems Raffournier (1995) found a direct relationship between company size and extent of voluntary disclosure, because public take more interest in bigger firms for investment decisions than in smaller firms While Archambault and Archambault (2003) found an inverse association between firm size and information disclosed score Few studies found inconsistent relationship between firm size and information disclosure index There is a greater demand providing more disclosure on large firms for analysts and the public (Mahmud Hossain et al., 2007) Auditing of a firm by one of the big audit firm will increase tendency of greater expected cash flow expectations and effective performance of the firm Well performing firms take more interest in disclosing the relevant information for advertisement of their performances (Bar-Yosef & Livnat, 1984) Large audit firms have possessed more number of analysts than small audit firms that’s why there is more demand of information to disclose by auditors Several researches found a significant relationship between extent of voluntary disclosure and audit size, if the firm is audited by one of the biggest audit company (Depoers, 2000; Raffournier, 1995) H1: There is a relationship between firm size and voluntary disclosure in annual reports of Pakistani listed companies Firm Age Audit Size There is a strong relationship exist between audit institution size and voluntary disclosure of firms Auditors give more assurance to investors that the firm’s financial statements are according to GAAP Firth (1979) claimed that largest auditing firms can force firms to disclose comprehensive relevant information, about firms decisions to maintain their reputations Auditing firms ask for adequate disclosure to management to highlight the hidden activities of managers DeAngelo (1981) found that big audit firms can charge more client-specific fees that depict the reputation of audit firm But this reputation may suffer if auditing firms issue negligent reports that are not properly disclosing the relevant information External auditors are hired by the companies to tumbling the contradiction of interest between owner and management by disclosing activities in front of owner and general public (Schipper, 1981) If more disclosure is recommended by auditing H2: There is a relationship between audit size and voluntary disclosure in annual reports of Pakistani listed companies Majority of studies found an indirect relationship between company age and voluntary disclosure (Akhtaruddin, 2005; Glaum & Street, 2003; Haniffa & Cooke, 2002; Mohammed Hossain, 2008) Owusu-Ansah (1998) claimed that newly born firms can gain competitive disadvantage if they disclose information of research and development Young companies have to bear more cost than old companies for voluntary disclosure of relevant information due to limited investment funds Due to insufficient records of firm operations these companies may disclose less information Mohammed Hossain and Hammami (2009) found that old companies tend to disclose more information than young companies They argued that there is significant indirect influence of firm age on the extent of voluntary disclosure on Qatari companies H3: There is a relationship between firm age and voluntary disclose information in the annual reports of Pakistani listed companies Leverage Najm-Ul-Sehar et al Voluntary Disclosure in Annual Report Empirical evidence depicts the direct relationship between financial leverage and level of disclosure (Mahmud Hossain, Adams, & Tan, 1994; Jaggi & Low, 2000; Khanna, Palepu, & Srinivasan, 2004) Agency theory explains that companies with greater level of debt in their capital structures bears the more agency cost (Jensen & Meckling, 1976) They argued that more level of leverage result in more agency cost To minimize the level of such cost require more disclosure of relevant information for investors With the raise in level of leverage there is more transfer of wealth Increase in level of leverage results in the increase in agency cost which cause a great demand of monitoring by investors (Meyers, 1977) Firms of high financial leverage require more transparency in their operations because investors demand them to disclose more financial information (Khanna et al., 2004) In addition, companies which have leverage in their capital structure are more encourage by auditors to voluntary disclose information to satisfy the needs of their creditors and other stakeholders H4: There is a relationship between leverage and voluntary disclose information in annual reports of Pakistani listed companies Profitability Inchausti (1997) stated that in relation with agency theory, managers of big companies, which are more profitable, are in the favor of more voluntary disclosure to attain the personal advantages such as to retain the better management position and compensation Also the more profitable companies are not protected by the regulatory intervention So they disclose more information about their operations in their annual reports for the justification of their performance efficiency and to reduce political costs (Inchausti, 1997; R Wallace & Naser, 1996) Mostly researchers found a positive relationship between profitability and the extent of disclosure (M Hossain, 2001; Mohammed Hossain & Hammami, 2009; R O Wallace, Naser, & Mora, 1994) H5: There is a relationship between profitability and voluntary information in the annual reports of Pakistani listed companies Research Paper DATA AND METHODOLOGY This portion of study gives enlightenment on sample selection, data collection procedure and methodology The most data for this study is collected from listed companies of Karachi Stock Exchange (KSE) on 31st December 2012 Random sampling technique is used in this study to select the sample and data includes annual reports of companies Authors aim to cover all listed companies in the sample but unfortunately data of all companies is not available Due to this authors collect the data of 372 out of 638 listed companies of Pakistan on the basis of data availability The data sources are annual report from official website of company and publications of Sate Bank of Pakistan and Karachi Stock exchange All the process of data entering and processing to generate results is done through Stata 11 software Cross-sectional regression analysis was employed to test the relationship between voluntary disclosure and firm’s characteristics DIi = β + β 1DRi + β 2AFi + β3ASi+ β4PROi + β5LIQi + β6FSi + I Where; DIi = Disclosure index of the firm DRi = Debt ratio of the firm AFi = Age of the firm ASi = Auditor Size of the firm PROi = Profitability of the firm LIQi = Liquidity of the firm FSi = Size of the firm In this model, disclosure index DI is dependent variable which is measured by taking ratio of scores obtained by firm to total scores The disclosure items are adopted from (Mohammed Hossain & Hammami, 2009) and provided in appendix The firm characteristics which include auditor size, age of the firm, firm size, leverage and profitability are act as independent variables The first independent variable auditor size is measured through a dummy variable, author take if audit firm of a firm is one of the top six audit firm of Pakistan and otherwise take The second independent variable is firm age and measured by taking difference from current year 2012 and year 186 Manag Adm Sci Rev ISSN: 2308-1368 Volume: 2, Issue: 2, Pages: 181-195 of establishment of the company The third independent variable is firm size and measured by taking natural log of total assets of the company The fourth independent variable is leverage and measured by debt ratio which total debt is divided by total assets The last independent variable is profitability and measured by Return on Assets ratio which is measured by ratio of total sales to total assets Empirical Results This section provides the results of the model which includes descriptive statistics, pearson correlation matrix and multiple regression analysis results TABLE HERE Tables brief about mean, standard deviation, minimum and maximum values Data consist of continuous variables, which results in broad range of variation First of all, has observation from 372 firms with minimum value 0.43182 and maximum value 0.84091 The average value of disclosure index is 0.6226 with standard deviation of 0.08255 Similarly, summary statistics of independent variables is given Auditor size has 372 observations, lowest and as largest value The average value of this variable is 0.4919 and standard deviation 0.5006 Age of firm has 05 and 67 as minimum and maximum value respectively, mean value 34.3145 and standard deviation 16.7858 Firm size has 3.34 and 8.26 as minimum and maximum value respectively, mean value 6.1681 and standard deviation 0.85946 Leverage has 0.12 and 382.58 as minimum and maximum value respectively, mean value 3.842 and standard deviation 34.200 Last independent variable profitability has -120.08 and 203.17 as minimum and maximum value respectively, mean value 18.8056 and standard deviation 46.12466 TABLE HERE Before running the model the data is checked through correlation between independent variables Rule of thumb is that correlation between independent variables not exceeds from 0.7 and if it exceeds from 0.7 then there is a chance of mutlicolinearity in the model Highest correlation between firm size and age of the firm is 2314 As this value is not exceeds from cut point 0.7, so there is no chances of mutlicolinearity in this model The further confirmation of mutlitolinearity assumption is checked by variance inflation factor (VIF) and tolerance (1/VIF) The rule of thumb for VIF is that it should not exceed from 10 while tolerance must be more than 0.1 The VIF and tolerance of the study is given in appendix and none of the variable has VIF more than 10 and tolerance less than 0.1 So, it is confirmed that there is no multicolinearity exist in this study TABLE HERE The multiple regression analysis shown in table 3, this model is good fit as F statistics 20.98 is significant The coefficient of determination R2 is 0.2228 which means firm’s characteristics can explain 22.28% variations in voluntary disclosure of listed companies of Pakistan Firm characteristics including auditor size, age of firm, firm size and profitability have positive and significant relationship with disclosure index While firm characteristic leverage has indirect and insignificant relationship with disclosure index As this data is cross sectional, there may be the chances of heterosekdasticty in the model due to the nature of data In order to control the heteroscedasticity, researchers used robust option The result of regression analysis with robust command is given in table This model is again proving good fit as F statistics improve to 52.34 from 20.98 and significant The coefficient of determination R2 is again same 0.2228 which means firm’s characteristics can explain 22.28% variations in voluntary disclosure of listed companies of Pakistan Firm characteristics including auditor size, age of firm, firm size and profitability again have positive and significant relationship with disclosure index While firm characteristic leverage has indirect but significant relationship with disclosure index These findings are same with previous studies in literature (Depoers, 2000; M Hossain, 2001; Mohammed Hossain & Hammami, 2009); Raffournier (1995); (R O Wallace et al., 1994) TABLE HERE CONCLUSION The finding of this study shows that firm characteristics; profitability, firm size, age and Najm-Ul-Sehar et al Voluntary Disclosure in Annual Report auditor size have positive and significant relationship with voluntary disclosure while leverage has negative and significant relationship with voluntary disclosure So, profitability, firm size, age, auditor size and leverage are the major determinants of voluntary disclosure of manufacturing firms of Pakistan All the hypothesis of this study are supported and in accordance with previous literature These findings are very useful for management, auditors, investors, creditors, customers, Government and other stakeholders of manufacturing companies of Pakistan As manufacturing firms of Pakistan are providing adequate disclosure voluntarily, this will enhance the information of all stakeholders The investors or owners of these firms can get proper financial, non-financial and strategic information from annual reports for their decision making Likewise other stakeholders including creditors, tax authorities, customers, financial institutions and others can get their required information from the disclosure in annual reports Manufacturing companies in Pakistan are providing adequate voluntary disclosure but there is great need of consistency and proper reporting of maximum information for stakeholders As firm characteristics have strong relationship with disclosure level, this study recommends to management and auditors of Pakistani manufacturing companies to improve the quality and reporting of voluntary disclosure in their annual reports This will enhance the confidence of their investors, satisfying their creditors and customers, improve their profitability and value of shares The major limitation of this study is availability of annual reports of all listed companies This study is conducting only on manufacturing sector of Pakistan, upcoming studies must focus on service sector of Pakistan or upcoming studies can make a panel of South Asian countries manufacturing firms or services firms as they have same environment but very different disclosure level REFERENCES Akerlof, G A (1970) The market for" lemons": Quality uncertainty and the market Research Paper mechanism The economics, 488-500 quarterly journal of Akhtaruddin, M (2005) Corporate mandatory disclosure practices in Bangladesh 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the Lafferty World's Leading Companies: Meyers, S (1977) Determinants of corporate borrowing Journal of financial economics, 5(2), 147-175 Upton, W S (2001) Business and financial reporting Challenges from the new economy Paper presented at the Financial Accounting Series (FASB) Special report (219-A),[Online], Available: http://www fasb org/articles&reports/new_economy shtml [18 Owusu-Ansah, S (1998) The impact of corporate attribites on the extent of mandatory disclosure and reporting by listed companies in Zimbabwe The International Journal of Accounting, 33(5), 605-631 Wallace, R., & Naser, K (1996) Firm-specific determinants of the comprehensiveness of mandatory disclosure in the corporate annual reports of firms listed on the stock exchange of Hong Kong Journal of Accounting and Public policy, 14(4), 311-368 Raffournier, B (1995) The determinants of voluntary financial disclosure by Swiss listed companies European Accounting Review, 4(2), 261-280 Wallace, R O., Naser, K., & Mora, A (1994) The relationship between the comprehensiveness of corporate annual reports and firm characteristics in Spain Accounting and Business Research, 25(97), 4153 Schipper, K (1981) Discussion of Voluntary Disclosure Corporate Disclosure: The Case of Interim Reporting Journal of accounting research, 19, 85-88 Watts, R., & Zimmerman, J (1986) Positive accounting theory Prentice-Hall Inc Skinner, D J (1994) Why firms voluntarily disclose bad news Journal of accounting research, 38-60 Smith, C W., & Warner, J B (1979) On financial contracting: An analysis of bond covenants Journal of financial economics, 7(2), 117-161 Spence, M (1973) Job market signaling The quarterly journal of economics, 87(3), 355-374 Stanga, K G (1976) Disclosure in published annual reports Financial Management, 4252 Tonkin, D F (1989) World Survey of Published Accounts: An Analysis of 200 Annual Reports Najm-Ul-Sehar et al Voluntary Disclosure in Annual Report Research Paper APPENDIX-1 Table 1: Descriptive Statistics Variable Disclosure Index Auditor Size Age of Firm Firm Size Leverage Profitability Observations 372 372 372 372 372 372 Mean 0.6226173 0.4919355 34.31452 6.168065 3.841693 18.80556 Std Dev 0.082553 0.5006083 16.78581 0.8594586 34.20033 46.12466 Minimum 0.4318182 3.34 0.12 -120.08 Maximum 0.8409091 67 8.26 382.58 203.17 Table 2: Pearson Correlation Matrix Discloure Variable Index Age of Auditor Firm Firm Size Leverage Disclosure Index 1.0000 Auditor Size 0.3820** 1.0000 Age of Firm 0.1920** 0.1634** 1.0000 Firm Size 0.2313** 0.1251* 0.1048* 1.0000 Leverage -0.0609 0.0893 -0.0461 -0.305* 1.0000 Profitability 0.2509** 0.1035* 0.1173* 0.2314* -0.0368 Profitability 1.000 Note: Variable is significant at * 1%, ** 5%, and *** 10% level of significance 192 Manag Adm Sci Rev ISSN: 2308-1368 Volume: 2, Issue: 2, Pages: 181-195 Table 3: Multiple Regression Analysis Variables Auditor Size Age of Firm Firm Size Leverage Profitability Constant Coefficient S Error T statistic P-value 0.0552938 0.0078391 7.05 0.000** 0.0005003 0.0002316 2.16 0.031* 0.0120957 0.0048319 2.50 0.013* -0.0000996 0.000118 -0.84 0.399 0.0003107 0.0000854 3.64 0.000** 0.4981815 0.0300915 16.56 0.000 Note: R2 = 0.2228, F-Stat = 20.98, and Prob > F = 0.000** Variable is significant at **1%, * 5%, and *** 10% level of significance Table 4: Multiple Regression Analysis (Robust) Variables Auditor Size Age of Firm Firm Size Leverage Profitability Constant Coefficient Robust S Error statistic P-value 0.0552938 0.0082721 6.68 0.000** 0.0005003 0.0002414 2.07 0.039* 0.0120957 0.0050366 2.40 0.017* -0.0000996 0.0000443 -2.25 0.025* 0.0003107 0.0000835 3.72 0.000** 0.4981815 0.0305601 16.30 0.000 Note: R2 = 0.2228, F-Stat = 52.34, and Prob > F = 0.000** Variable is significant at **1%, * 5%, and *** 10% level of significance Najm-Ul-Sehar et al Voluntary Disclosure in Annual Report Research Paper Appendix 2: Voluntary Disclosure Items A Background about the bank/general corporate information (6): Brief narrative history of the bank Basic organization structure/chart/description of corporate structure General description of business activities Date of establishment of the company Official address/registered address/address for correspondence Web address of the bank/email address B Corporate strategy (2): Management's objectives and strategies/corporate vision/motto/statement of corporate goals or objectives Future strategy—information of future expansion (capital expenditures)/ general development of business C Corporate governance (9): Detail about the chairman (other than name/title) background of the chairman/academic/professional/business experiences 10 Details about directors (other than name/title) background of the directors/ academic/professional/business experiences 11 Number of shares held by directors 12 List of senior managers (not on the board of directors)/senior management structure 13 Directors' engagement/directorship of other companies 14 Picture of all directors/board of directors 15 Picture of chairperson 16 Composition of Board of Directors 17 Number of BOD meetings held and date D Financial performance (6): 18 Brief discussion and analysis of afinancial position 19 Return on equity 20 Net interest margin 21 Earnings per share 22 Debt-to-equity ratio 23 Dividend per share E General risk management (8): 24 Discussion of overall risk management philosophy and policy/framework 25 Narrative discussions on risk assets, risk measurement and monitoring 26 Information on risk management committee 27 Information on assets–liability management committee 28 Information on risk management and reporting system 29 Disclosure of credit rating system/process 30 General descriptions of market risk segments 31 Disclosure of interest rate risk F Accounting policy review (2): 32 Discussion on accounting policy 33 Disclosure of accounting standards uses for accounts G Corporate social disclosure (3): 34 Sponsoring public health, sponsoring of recreational projects 35 Information on donations to charitable organizations H Others (8): 37 Age of key employees 38 Chairman's/MD's report/directors report 39 Information on ISO 9001: 2000 certification 40 Graphical presentation of performance indicators 41 Performance at a glance—3 years 194 Manag Adm Sci Rev ISSN: 2308-1368 Volume: 2, Issue: 2, Pages: 181-195 42 Related party disclosure 43 Details of non-compliance, penalties imposed by SE or SEBI 44 Year of listing at DSM Source: Adopted from (Mohammed Hossain & Hammami, 2009) Appendix 3: Collinearity Statistics Variable VIF 1/VIF Firm Size 1.19 0.839133 Leverage 1.13 0.888229 Profitability 1.07 0.933075 Auditor Size 1.06 0.939685 Age of the Firm 1.04 0.957551 Najm-Ul-Sehar et al [...]... senior managers (not on the board of directors)/senior management structure 13 Directors' engagement/directorship of other companies 14 Picture of all directors/board of directors 15 Picture of chairperson 16 Composition of Board of Directors 17 Number of BOD meetings held and date D Financial performance (6): 18 Brief discussion and analysis of afinancial position 19 Return on equity 20 Net interest... disclosures by US, UK and continental European multinational corporations Journal of international business studies, 555-572 from the Lafferty World's Leading Companies: Meyers, S (1977) Determinants of corporate borrowing Journal of financial economics, 5(2), 147-175 Upton, W S (2001) Business and financial reporting Challenges from the new economy Paper presented at the Financial Accounting Series (FASB) Special... strategies/corporate vision/motto/statement of corporate goals or objectives 8 Future strategy—information of future expansion (capital expenditures)/ general development of business C Corporate governance (9): 9 Detail about the chairman (other than name/title) background of the chairman/academic/professional/business experiences 10 Details about directors (other than name/title) background of the directors/ academic/professional/business... on assets–liability management committee 28 Information on risk management and reporting system 29 Disclosure of credit rating system/process 30 General descriptions of market risk segments 31 Disclosure of interest rate risk F Accounting policy review (2): 32 Discussion on accounting policy 33 Disclosure of accounting standards uses for accounts G Corporate social disclosure (3): 34 Sponsoring public... Reporting Journal of accounting research, 19, 85-88 Watts, R., & Zimmerman, J (1986) Positive accounting theory Prentice-Hall Inc Skinner, D J (1994) Why firms voluntarily disclose bad news Journal of accounting research, 38-60 Smith, C W., & Warner, J B (1979) On financial contracting: An analysis of bond covenants Journal of financial economics, 7(2), 117-161 Spence, M (1973) Job market signaling... listed companies European Accounting Review, 4(2), 261-280 Wallace, R O., Naser, K., & Mora, A (1994) The relationship between the comprehensiveness of corporate annual reports and firm characteristics in Spain Accounting and Business Research, 25(97), 4153 Schipper, K (1981) Discussion of Voluntary Disclosure Corporate Disclosure: The Case of Interim Reporting Journal of accounting research, 19, 85-88 Watts,... Najm-Ul-Sehar et al Voluntary Disclosure in Annual Report Research Paper Appendix 2: Voluntary Disclosure Items A Background about the bank/general corporate information (6): 1 Brief narrative history of the bank 2 Basic organization structure/chart/description of corporate structure 3 General description of business activities 4 Date of establishment of the company 5 Official address/registered address/address... attribites on the extent of mandatory disclosure and reporting by listed companies in Zimbabwe The International Journal of Accounting, 33(5), 605-631 Wallace, R., & Naser, K (1996) Firm-specific determinants of the comprehensiveness of mandatory disclosure in the corporate annual reports of firms listed on the stock exchange of Hong Kong Journal of Accounting and Public policy, 14(4), 311-368 Raffournier,... Performance at a glance—3 years 194 Manag Adm Sci Rev ISSN: 2308-1368 Volume: 2, Issue: 2, Pages: 181-195 42 Related party disclosure 43 Details of non-compliance, penalties imposed by SE or SEBI 44 Year of listing at DSM Source: Adopted from (Mohammed Hossain & Hammami, 2009) Appendix 3: Collinearity Statistics Variable VIF 1/VIF Firm Size 1.19 0.839133 Leverage 1.13 0.888229 Profitability 1.07 0.933075 Auditor