The determinants of firms' extensive disclosure of financial ratios in the annual reports: an empirical investigation / Moktar Awang

Malaysia is currently experiencing a liberal and competitive economic environment, which has led to a greater investment interest in corporate securities. Likewise, Malaysian firms are also developing strategies to attract investors, for example, through voluntary disclosure of information. Part of the voluntary disclosure information in the annual reports is financial ratios. Therefore, the information on the level of financial ratios voluntarily disclosed by Malaysian companies is of interest to prospective investors. The purpose of this study is to examine empirically the relationship between five firm-specific characteristics and the general level of financial ratios disclosure that were voluntarily disclosed by companies listed on Kuala Lumpur Stock Exchange (KLSE). In this study the a priori expectations are based on agency theory. The five firm-specific characteristics examined are: firm size, leverage, assets-in-place, type of auditor, and sector of the company. The results obtained from cross-sectional regression show that the firm size and company sector are significantly related to the extent of financial ratios disclosure. In contrast, assets-in-place, leverage and type of auditor are not significant explanatory variables. A study of this type would be of particular relevance to accounting policy makers because inter alia, it helps them in (a) understanding corporate disclosure behaviour, (b) explaining why firms adopt certain disclosure strategies, and (c) developing a coherent and acceptable set of mandatory disclosure requirement on financial ratios.