Academic journal article Accounting & Taxation

The Impact of Ownership Structure on Voluntary Corporate Disclosure in Annual Reports: Evidence from Fiji

Academic journal article Accounting & Taxation

The Impact of Ownership Structure on Voluntary Corporate Disclosure in Annual Reports: Evidence from Fiji

Article excerpt

ABSTRACT

The extent of voluntary corporate disclosure by companies in annual reports in recent years has increased due to various factors. A number of prior studies examined the relationship between ownership concentration and voluntary corporate disclosure. Their findings suggest there is less voluntary corporate disclosure in family owned and high shareholder concentrated firms. On the other hand, companies with low shareholder concentration are likely to have more voluntary corporate disclosure because of the principal to agent relationship. Though studies have examined the impact of ownership structure on the extent of voluntary disclosure, there is still a need to investigate the issue in the Pacific Island countries, such as Fiji. The ownership structure of the companies in Fiji is highly concentrated. This paper examines the relationship between ownership structure and the extent of voluntary corporate disclosure in annual reports of listed companies in Fiji. A content analysis approach suggests how the ownership structure affects the extent of voluntary corporate disclosure in Fiji.

JEL: M14, M41

KEYWORDS: Ownership Structure, Voluntary Corporate Disclosure

INTRODUCTION

Voluntary corporate disclosures have received considerable attention following the recent corporate collapses, business scandals and emerging issue concerning the protection of minority shareholders. Annual reports are a primary medium various stakeholders rely on for making decisions. Thus management, responsible for preparing the annual reports, is accountable to all the stakeholders. As a result, they should disclose all relevant information in the annual reports for stakeholders to make efficient economic decisions. In addition, increased disclosures of information, apart from the ones required by the standards and the regulators are important. These additional disclosures protect the interest of minority shareholders and ensure transparency of company's information to its interested parties. Meek, et al. (1995) define voluntary corporate disclosure as "disclosures in excess of requirements in annual reports and other media as deemed relevant by the company management for an effective decision-making by the users of the financial reports. " However, due to the separation of ownership and control the incentive for the management to provide additional disclosures decreases.

Prior studies have examined the impact of ownership structure on voluntary corporate disclosures in countries such as US, UK, Continental European countries, Australia, New Zealand and in the Asian markets (see, Cooke ,1991; Frost & Pownall,1994; Gray, et al.,1995; Meek, et al.,1995; Turpin & Dezoort ,1998; Hossain, et al., 1994; and Chau & Gray, 2002). Two of these studies found that in concentrated companies there were less voluntary corporate disclosures compared to dispersed companies (Chau and Gray, 2002; Hossain, et al., 1994). These studies found a positive association between wider share ownership and voluntary corporate disclosures by firms.

In a more recent study, Samaha and Dahawy (2011), note that few studies examine the disclosure practices of companies in developing economies. The current paper examines the level of voluntary corporate disclosures done by listed firms in Fiji. The South Pacific Stock Exchange (SPSE), currently highly inactive with only 1 6 firms listed on the exchange, is responsible for monitoring these listed firms in Fiji. These listed firms have high shareholder concentration that could have a considerable influence on the level of voluntary corporate disclosures the firms make.

The controlling shareholders in these concentrated companies mostly maximize their self-interest rather than that of the minority shareholders. Thus, there is increased emphasis on the need to ensure the protection of the interests of minority shareholders. Minority shareholders are entitled to receive all relevant information to make an informed judgment on the performance of the company. …

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