The Extent and Determinants of Voluntary Disclosures in Annual Reports: Evidence from Banking and Finance Companies in Sri Lanka

Abstract

Corporate disclosures are essential for every stakeholders. Hence, in excess of mandatory disclosures companies are voluntary disclosed information. The voluntary disclosure level is different from company to company and there may be some factors which are affect to this variation. Therefore, the objectives of this study are to identify the extent of voluntary disclosure level and its determinants. In order to achieve these objectives the study develop a voluntary disclosure index including 83 items and the nine sub categories which include in this index analyzed by employing content analysis in the annual reports of quoted public banking and finance companies for the time period of 2012 to 2015. Furthermore, this study analyze the selected variable to identify the determinants of voluntary disclosure level by employing panel data analysis. The study find that disclosures about general information, corporate environment, financial performance and risk management has more than 61% level and Corporate strategy, forward looking information, human and intellectual capital, competitive environment and outlook and corporate social responsibility information have less than 45% average in 2015 and it indicates that there is a much room for improvement in the context of voluntary disclosures. Furthermore, the study find that firm size, profitability, firm’s age, leverage and board independence as determinants of voluntary disclosure level and among them firm size, profitability and firm’s age have positive relationship and leverage and board independence has negative relationship.