European Journal of Developing Country Studies, Vol.9 2010 ISSN(paper)2668-3385 ISSN(online)2668-3687 www.BellPress.org Corporate Governance and Financial Reporting Disclosures: Bangladesh Perspective Dr Md Shamimul Hasan Assistant Professor, Department of Business Administration World University of Bangladesh, Dhaka, Bangladesh, Dr Syed Zabid Hossain Professor, Department of Accounting and Information Systems, University of Rajshahi, Former Pro-vice Chancellor, University of Khulna, Bangladesh Dr Robert J Swieringa Professor of Accounting, Anne and Elmer Lindseth Dean Emeritus, John Graduate School of Management, Cornell University, Ithaca, New York, Former Board Member of FASB ABSTRACT Financial reporting disclosures are very essential to the shareholders of a company because they frequently use these disclosures for their economic decisions about the business enterprise Board of directors, corporate management and external auditor may have an influence on financial reporting disclosures From this perspective, the study investigates the influence of corporate governance on financial reporting disclosures The results show that corporate governance is significantly associated with the extent of financial reporting disclosures External auditor, multilisting and profitability are significantly (5 percent level) associated with overall financial reporting disclosures index Keywords: Bangladesh, financial reporting disclosure, corporate governance Introduction This research investigates the influence of corporate governance on corporate financial reporting disclosures The scandals of high profile companies such as Enron, WorldCom, Tyco and some other firms in the U.S, have realized the question of the effectiveness of monitoring mechanisms in organizations (Raphaelson and Wahlen, 2004) Corporate governance refers to the structures and processes for the direction and control of companies 20 European Journal of Developing Country Studies, Vol.9 2010 ISSN(paper)2668-3385 ISSN(online)2668-3687 www.BellPress.org Good governance contributes to sustainable economic development by enhancing the performance of companies and increasing their access to outside capital Corporate governance reduces emerging market vulnerability to financial crises, reinforces property rights, reduces transaction costs and the cost of capital, and leads to capital market development Weak corporate governance frameworks reduce investors’ confidence, and can discourage outside investment Also, as pension funds continue to invest more in equity markets, corporate governance is crucial for preserving retirement savings (World Bank: 2009) Corporate governance is affected by the relationships among participants in governance system Controlling shareholders, which may be individuals, family holdings, bloc alliances, or other corporations acting through a holding company or cross holdings, can significantly influence corporate behavior As owners of equity, institutional investors are increasingly demanding a voice in corporate governance in some markets Individual shareholders usually not seek to exercise governance rights but may be highly concerned about obtaining fair treatment from controlling shareholders and management Creditors play an important role in a number of governance systems and can serve as external monitors over corporate performance Employees and other stakeholders play an important role in contributing to the long-term success and performance of the corporation, while governments establish the overall institutional and legal framework for corporate governance (OECD: 2004) In Bangladesh, January 10, 2011 is called Black Monday because the stock market collapsed on that date and has not yet recovered Though a lot of measures have been taken by the Securities and Exchange Commission (SEC), Dhaka Stock Exchange (DSE), Chittagong Stock Exchange (CSE), Bangladesh Bank (BB), and Ministry of Finance (MoF), there is no result of these efforts Almost every day of the year 2011, small investors were engaged in many activities, including procession, press-conference, hunger-strike, block the roads, and close the stock market trade as a part of their expression of frustration They solicited intervention of the Prime Minister for stabilizing the market Even they expressed their anguish and frustration by opening their chest and inviting government officials to shoot them The probe report opined that there are many issues that are responsible for collapse of the market Governance of SEC and other institutions could not satisfy the probe committee (PC) One of the main recommendations of the committee was the removal of chairman, executive director and directors of SEC (SMIR, 2011) This recommendation clearly indicates 21 European Journal of Developing Country Studies, Vol.9 2010 ISSN(paper)2668-3385 ISSN(online)2668-3687 www.BellPress.org a red flag for corporate governance Whereas, SEC is the only regulating authority of the listed companies that regulates annual financial reporting disclosures of the companies, it is expected that the financial reporting disclosures of the companies are not regularly monitored Under these crucial circumstances, investors believe that the capital market in Bangladesh is volatile up till now Good corporate governance is an important prerequisite for attracting the patient capital needed for sustained long-term economic growth, and can lead to better relations with workers, creditors, and other stakeholders Corporate ownership is concentrated and companies are often controlled by a small number of related shareholders A few companies have dispersed ownership Most securities in Bangladesh are held by individuals- the controlling family or members of the public – rather than institutions or other companies: 43 percent of market is held by sponsors who are from the founders’ families, and 38 percent is held by the public at large Sponsors often have management and or board positions in companies Institutional investors hold only 10 percent of the market but are sometimes represented on company boards Foreigners hold percent of the market (World Bank: 2009) There is no single model of corporate governance (OECD: 2004) The SEC issued Guidelines on Corporate Governance in 2006 Listed companies are required to “comply or explain” The Guidelines cover some key topics, including the functioning of the board, and internal and external controls The Guidelines not deal with other aspects of corporate governance, including shareholder rights Compliance is at its early stage – in 2007, about 33 percent of companies declared full compliance with the Guidelines and 60 percent declared partial compliance (World Bank: 2009) There are no provisions for punitive measures for noncompliance of any one of the conditions mentioned in the notification Only “comply or explain” basis is not enough in Bangladesh for ensuring good governance Although financial information disclosed by the Bangladeshi companies is increasing day by day, the reliability of this reporting is decreasing day by day due to lack of practices of corporate governance Adherence to corporate governance practices will help improve the confidence of investors, reduce the cost of capital, underpin the good functioning of financial markets, and ultimately induce more stable sources of financing (OECD: 2004) Good governance in the corporate sector is a burning issue in Bangladesh 22 European Journal of Developing Country Studies, Vol.9 2010 ISSN(paper)2668-3385 ISSN(online)2668-3687 www.BellPress.org In this paper we argue that there is obviously an influence of corporate governance on corporate financial reporting disclosures index The researchers commence their analysis by measuring overall disclosure index by twenty non-financial companies included in DSE The researchers use a comprehensive measure of disclosure that captures the nature and extent of information and are able to glean insights about the disclosures index This would be the first known study to examine the association between corporate governance and overall financial reporting disclosures index The weak form of corporate governance in Bangladesh allows the researchers to (1) overview corporate financial reporting practices by non-financial companies listed in DSE, (2) identify different aspects of corporate governance , and (3) to examine the association between corporate governance and corporate financial reporting disclosures index Next, the researchers test hypotheses about the relationship between corporate governance and corporate reporting disclosures index The researchers capture the impact of corporate governance using three measures, such as dependent variable (corporate financial reporting disclosures index), independent variables, and linkage between dependent and independent variables Present examination of the relationship between corporate governance and corporate financial reporting disclosures index extends the literature on the determinants of corporate reporting disclosures index Previous researches have investigated a range of factors potentially associated with disclosures including board independence, dominant personality, board size, institutional ownership, external auditors, general public ownership, leverage, asset size, profitability, multilisting, and number of shareholders However, the influence of corporate governance on corporate financial reporting disclosures index has not been examined previously Present finding of significant relationship between external auditor and corporate reporting disclosures index supports the tenets of principal-agent theory and demonstrate the potential for this powerful and legitimate stakeholder group to influence corporate financial reporting disclosures index in Bangladesh Several other factors found to be associated with corporate financial reporting disclosures in prior researches have been controlled A final contribution of this research relates to the growing body of literature on corporate governance (external auditor engagement) and corporate financial reporting disclosures Present study extends this area of research by investigating and finding support for the role of external auditor in relation to corporate financial reporting disclosures The research provides robust 23 European Journal of Developing Country Studies, Vol.9 2010 ISSN(paper)2668-3385 ISSN(online)2668-3687 www.BellPress.org empirical evidence in support of claims in the literature that external auditor’s demand can drive corporate action The remainder of the paper is organized as follows The next section reviews the prior literature and develops the hypotheses for the study Section outlines the data and method, section presents the results of the analysis and Section concludes Literature Review and Hypotheses Development 2.1 Prior Literature One function of financial reporting is to restrain management to act against the shareholders’ interest (Watts and Zimmerman, 1978) Due to increasing complexity of business today, there is a demand for disclosure of more comprehensive information in the annual report as both potential and existing investors make their economic decision by using this information In the global investor opinion survey of McKinsey & Company (2002) on corporate governance issues, a majority of the investors agree that corporate governance remains a great concern with strengthening the quality of accounting disclosures as a top priority Majority of institutional investors is willing to pay a high premium for companies having good governance The survey also provides evidence that a majority of respondents (71 percent) states that accounting disclosures are the most important factor that influences their investment decisions and 52 percent of respondents identify that improving financial reporting quality is a governance priority for policymakers Good governance goes hand-in-hand with reduced risk of financial reporting problems and other bad accounting outcomes (Hermanson, 2003) Information disclosed by the companies in their annual report can be used as important input in various corporate governance mechanisms (Bushman and Smith, 2001) Good governance by board of directors can influence financial reporting disclosures, which in turn has an important impact on shareholders confidence (Levitt, 1998 and 2000) There has been a considerable debate in recent times about the need for strong corporate governance (McConomy and Bujaki, 2000), with the countries around the world drawing up guidelines and codes of practice to strengthen governance (Cadbury, 1992; 24 European Journal of Developing Country Studies, Vol.9 2010 ISSN(paper)2668-3385 ISSN(online)2668-3687 www.BellPress.org Corporate Governance Code of Bangladesh, 2006) The rationale for this emphasis can be linked to growing concerns over the integrity of stock markets (International Federation of Accountant – IFAC, 2010; Millstein, 1999) Previous studies have shown that good corporate governance reduces adverse effects of earnings management as well as likelihood of creative financial reporting arising from fraud or errors (Beasley, 1996; Dechow, et al, 1996; McMullen, 1996) Traditionally, the external auditor has also played an important role in improving the credibility of financial information (Mautz and Sharaf, 1961; Wallace, 1980) The differences in corporate governance across countries emerge as a result of the variations in the ownership structure and understanding the effects of various ownership structure variables is vital to shed light on corporate governance and control process of firms under difference national types of institutional arrangements (Li, 1994) Recent empirical works on the association between traditional financial reporting disclosures and corporate governance Chen and Jaggi (2000) and Eng and Mark (2003) Chen and Jaggi (2000) find a positive association between the proportion of independent non-executive directors and the comprehensiveness of information in mandatory financial disclosure of Hong Kong companies Eng and Mark (2003) find that lower managerial ownership and significant government ownership are associated with increased disclosure and that an increase in outside directors reduces the corporate disclosure of firm listed on the Stock Exchange of Singapore In Malaysia, one-man or family run companies (Halim, 2001) and significant government equity holdings (Abdullah, 2006) distinguish the ownership pattern of Malaysian companies that may complicate the corporate governance systems Extensive occurrence of individual and family run companies tends to discourage professionalism, encourage non-compliance and facilitate creative accounting as well as to result in severe conflicts of interests (Halim, 2001) 2.2 The Variables and Hypotheses Development 2.2.1 Dependent Variable: An Overall Disclosures Index (ODI) of sample companies was used as the dependent variable and several corporate governance and control variables were used as the 25 European Journal of Developing Country Studies, Vol.9 2010 ISSN(paper)2668-3385 ISSN(online)2668-3687 www.BellPress.org independent variables to test the influence or impact of the corporate governance variables over the ODI 2.2.2 Primary Independent Variables (Corporate Governance Variables): Board Independence (bi) Dominant Personality (dp) Board Size (bs) Institutional Ownership (io) General Public Ownership (gp) External Auditor (ea) 2.2.3 Secondary Independent Variables (Control Variables) Leverage (lvg) Asset Size (asstsz) Profitability (profitab) Multi Listing (multilis) Number of Shareholders (shareholders) Board Independence The board, which comprises a number of independent directors, has a greater monitoring and controlling ability over management (Fama and Jensen, 1983) The state of ‘independence’ is met when a director inter alia is neither holding significant ownership nor holding any executive position in the company (Bursa Malaysia, 2006) In Bangladesh, SEC corporate guidelines stated that one-tenth of the total number of the company’s board of directors, subject to a minimum of one, should be independent directors But in Malaysia, if a company has only three board members, two of them are required to be independent (Bursa Malaysia, 2006) Fama and Jensen (1983), Ho and Wong (2001), Cheng and Courtenay (2004) and Norita and Shamsul-Nahar (2004) found a significant positive association On the other hand, Eng and Mark (2003), Gul and Leung (2004) and Barako et al (2006) found a negative association This variable is taken in this study as an independent variable and the hypothesis is as follows: 26 European Journal of Developing Country Studies, Vol.9 2010 ISSN(paper)2668-3385 ISSN(online)2668-3687 www.BellPress.org Ho: There is no association between board independence and overall disclosures index CEO Duality / Dominant Personality The corporate governance literature has emphasized the need to separate the position of CEO (chief executive officer) and board chairman to guarantee the board independence and improve transparency (Jensen, 1993) In this respect, Dechow et al (1996) revealed that the duality CEO-chairman increases the likelihood of violating the accounting principles in American firms Byard et al (2006) indicated that the presence of a CEO who serves also as the board chairman is associated with poor quality of financial information Similarly, Beeks et al (2004) and Firth et al (2007) reported that the financial reporting is more relevant in the case of separating the positions of CEO and board chairman for British and Chinese firms Nevertheless, other authors did not detect a significant association between CEO duality and financial reporting (Ahmed et al., 2006; Bradbury et al., 2006; Petra 2007) CEO duality is considered as an independent variable in this study and the hypothesis is as under: Ho: There is no association between CEO Duality and overall disclosures index Board Size The number of directors is an important factor in the board of directors’ effectiveness A larger board size may bring a greater number of directors with experience (Xie et al., 2001) that may represent a multitude of values (Halme and Huse, 1997) on the board On the contrary, a reduced number of directors imply a high degree of coordination and communication between them and managers (Jensen, 1993) Chaganti et al (1985) claimed that smaller boards are manageable and more often play a role as a controlling function whereas larger boards may not be able to function effectively as the board leaves the management relatively free Indeed, Vefeas (2000), Ahmed et al (2006) and Bradbury et al (2006) found that large board size reduces the information content of income and intensifies the earning management respectively for American, Singapore and New Zealand firms However, several authors argued that the high number of directors ensures the value relevance of financial statements (Byard et al., 2006), while others did not confirm this link (Firth et al., 2007) The study by Bonn (2004) found no relationship between board size and firm performance She further argued that the board size only measures the factual number of 27 European Journal of Developing Country Studies, Vol.9 2010 ISSN(paper)2668-3385 ISSN(online)2668-3687 www.BellPress.org directors without capturing their task Hence, one could argue that it is the skills and knowledge base that the board brings to the firm not the number In contrast, Dwevedi and Jain (2005), found an insignificant positive relationship They conclude that larger boards are in a position to improve the governance of the company As such, board size is used as an independent variable in the current study and the hypothesis is as follows: Ho: There is no association between board size and overall disclosures index Institutional Ownership Considering the influence of shareholder activism in governance reforms is important to obtain insight into governance practices (Daily et al., 2003) To date, institutional investors’ participation has emerged as an important force in corporate monitoring mechanism to protect minority shareholders’ interest The significant increase in the institutional shareholdings has led to the formation of a large and powerful constituency to play a significant role in corporate governance In the UK, institutional investors own between 65 to 75 percent of the UK stock market, which suggest a prominent role that institutional shareholders can play as an agent to the governance systems (Mallin,2003) To mitigate the problems associated with conflict between controlling owners and minority shareholders in Asian firms, the involvement of institutional investors’ equity participation may improve corporate governance practices (Claessen and Fan, 2002) Concentrated shareholdings by institution provide an incentive for diligent monitoring as they have the resources, expertise and stronger incentives to actively monitor the actions of management and prevent managers’ opportunistic behavior (Wan Hussin and Ibrahim, 2003) Institutional shareholders are often characterized in academic research as sophisticated investors who have advantages in acquiring and processing information compared with other investors (Bartov et al., 2000; Jiambalvo et al., 2002) Consequently, institutional investors can be more effective as traders and monitors than can small, diffuse retail investors Intuitional investors could actually prefer that information not be broadly disseminated because they are concerned about either a decline in the quality of the information communicated or a loss of their information advantage (NIRI, 2000) Recent studies indicate a negative relation between institutional ownership and voluntary disclosure (Kelton et.al 2004) While examining the determination of a firm’s decision to provide shareholders access to conference calls, Bushee at al (2003) find that firms that provide open conference calls 28 European Journal of Developing Country Studies, Vol.9 2010 ISSN(paper)2668-3385 ISSN(online)2668-3687 www.BellPress.org have a lower institutional ownership than firms that not provide open calls Institutional ownership is accepted in the present study as an independent variable and the hypothesis is as given below Ho: There is no association between institutional ownership and overall disclosures index General Public Differences in the proportion of a firm that is owned by outsiders may account for some of the observed differences - in the comprehensiveness of mandatory disclosure, because the greater number of people who need to know about the affairs of a firm, the greater will be the details required of an item of information and the more comprehensive the disclosure of a firm will be (Apostolou and Nanopoulos, 2009) Leftwich et al (1981) suggested that issuing financial reports could solve monitoring problems associated with increases in the proportion of the firm owned by outsiders If this is true, one would expect to find from a population of reporting firms that, as the number of shareholders or the proportion of the firm owned by outsiders’ increases, the financial information disclosed in annual reports will become more comprehensive It is expected that if a company has a large proportion of public ownership, the political cost will be bigger and the company will decide to disclose more information General Public is an independent variable and the hypothesis isHo: There is no association between general public and overall disclosures index External Auditor The external audit can be an effective control mechanism to monitor the managers and guarantee the integrity of financial reports (Jensen and Meckling, 1976; Watts and Zimmerman, 1983) The appointment of an independent external auditor can reduce the probability of earnings manipulation by shrinking managerial opportunism (DeAngelo, 1981; Becker et al., 1998; Chung et al., 2003) In practice, the auditor reputation or quality is associated with being part of or affiliated with a major international auditing firm (Brown et al., 2010) Several authors advocated that financial information is more reliable for “BIG 4” clients in comparison with other companies (Teoh and Wong, 1993; Becker et al., 1998) In Bangladesh, there are six audit firms that have international links The following table presents the list of those audit firms: 29 European Journal of Developing Country Studies, Vol.9 2010 ISSN(paper)2668-3385 ISSN(online)2668-3687 www.BellPress.org Food & Allied 63 25 Total 40 20 214 100 Total size of population was 40 and sample size was 20 which represent 50 percent of total population The sample size in terms of percentage of population was dissimilar and the percent of sample size of each stratum was equal i.e., 25 percent 3.2 Selection of Disclosure Items A draft check list was prepared that provided the basis for a survey with yes / no questions that was used to select the individual items for the final checklist Finally, two-hundred items were used to measure a company disclosure score The 200 items reflect the following disclosure items of an annual report Table -2: Summary of Draft and Final Disclosure Checklist Parts Disclosure Key Total Items (Draft) Items accepted (Final) Number % Number % Percentage of items accepted General Disclosure Items GDI 25 11 20 10 80 Company Profile Items CPI 25 11 15 60 Directors Report Items DRI 30 14 28 14 93 Financial Highlight Items FHI 30 14 27 14 90 Accounting Polices Items API 26 12 26 13 100 Income Statement Items ISI 14 14 100 Balance Sheet Items BSI 48 22 48 24 100 Cash Flow Statement Items CFSI 22 10 22 11 100 220 100% 200 100% 91% Overall Disclosure 3.3 Scoring the Disclosure Items Various approaches are available to develop a scoring scheme to determine the disclosure level of corporate annual reports The items were considered equally important to disclose and hence a dichotomous unweighted approach was used for scoring If a company discloses an item it will be awarded one and if not it will be awarded zero 3.4 Developing Overall Disclosure Index 33 European Journal of Developing Country Studies, Vol.9 2010 ISSN(paper)2668-3385 ISSN(online)2668-3687 www.BellPress.org Partial Compliance Unweighted Approach was used to measure the overall disclosure index This is the first time that this approach is used in Bangladesh to measure the overall disclosure index because the level of compliance of the companies is not the same The formula is as follows: Where, PCJ = Total compliance score for each company and Xi = Level of compliance with each part of disclosure requirement Rj = Total number of disclosure part of each company Statistical Analysis 6.1 Descriptive Statistics for Surveyed Companies Descriptive analysis of a company is essential in order to measure the company performance in disclosing information in the annual report In this overall disclosure indexes, standard deviation, coefficient of variation and rank of the companies have been calculated Ranking has been made on the basis of coefficient of variation of the company; the lowest coefficient of variation means the company is more consistent in disclosing information in annual report and received upper rank Table-3: Descriptive Statistics of Surveyed Companies Serial No Descriptive Statistics Company Name Rank Mean SD CV ODI Textile Segment: HR Textile Mills Limited 12 0.56 0.26 0.46 BEXTEX Limited 0.76 0.14 0.19 Apex Weaving and Finishing Ltd 0.66 0.14 0.22 0.67 34 0.63 European Journal of Developing Country Studies, Vol.9 2010 ISSN(paper)2668-3385 ISSN(online)2668-3687 www.BellPress.org Saiham Textile Mills Ltd 11 0.49 0.16 0.33 Alltex industries limited 0.69 0.15 0.22 Pharmaceuticals Segment: IBN SINA 0.74 0.16 0.21 LIBRA 0.73 0.13 0.17 SQUARE 0.80 0.14 0.18 BEXIMCO 10 0.71 0.18 0.26 10 ORION 10 0.62 0.16 0.26 0.72 Cement Segment: 11 Heidelberg cement Bangladesh Ltd 0.81 0.10 0.12 12 Meghna Cements Mills Ltd 11 0.62 0.20 0.33 13 Aramit Cement Ltd 0.62 0.15 0.24 14 Confidence Cement Ltd 0.63 0.09 0.14 15 Lafrage Surma Cement Ltd 0.65 0.15 0.24 0.67 Food and Allied Segment: 16 Apex Foods Ltd 0.74 0.10 0.14 17 Fu-Wang Foods Ltd 0.66 0.15 0.22 18 Gulf Foods Ltd 0.65 0.13 0.20 19 Fine Foods Ltd 0.61 0.15 0.24 20 Rahima Foods Corporation Ltd 11 0.65 0.21 0.33 0.66 6.2 Descriptive Statistics for Independent Variables There is diversity of the levels of financial disclosures across companies The overall financial disclosures index score assigned to the companies had a mean disclosure index of 67 percent, a standard deviation of 0.07, a maximum score of 81 percent, and a minimum score of 49 percent Hence, the aim of the analysis was to identify the variables, both quantitative and qualitative, that were responsible for such variations in the level of financial disclosures The descriptive statistics for the dependent and independent variables are presented in the following table Table- 4: Descriptive Statistics for Dependent and Independent Variables Variables N Minimum Maximum Odi 20 0.49 0.81 35 Mean 0.67 Std Deviation 0.08 European Journal of Developing Country Studies, Vol.9 2010 ISSN(paper)2668-3385 ISSN(online)2668-3687 www.BellPress.org Bi 20 0.00 60.00 17.50 12.21 Dp 20 0.00 1.00 0.30 0.47 Bs 20 4.00 11.00 7.15 2.01 Io 20 0.00 83.90 28.42 23.03 Gp 20 12.35 68.33 37.65 16.07 Ea 20 0.00 1.00 0.25 0.44 Lvg 20 0.00 1.00 0.75 0.44 Asstsz 20 14.74 12218.00 2272.72 3914.73 profitab 20 -15.66 156.56 21.87 41.19 multilis 20 0.00 1.00 0.95 0.22 sholders 20 545.00 65556.00 13567.25 17622.87 6.3 Correlation Matrix and Multicollinearity Analysis Pearson’s Pair Wise Product Moment Correlation Coefficient (r) is computed in order to examine the correlation between dependent and independent variables A correlation matrix of all the values of r for the independent variables along with the dependent variables had been constructed by using Statistical Package for Social Science (SPSS), which is shown in the following table Table- 5: Correlation Matrix Variable Odi Bi Dp Bs Io Gp Ea Lvg Astsz Pftab Multilis sholders odi -0.10 0.37 0.21 0.30 0.05 0.48* 0.43* 0.33 0.54** 0.54** 0.42* bi -0.14 -0.44* -0.01 -0.26 -0.17 0.11 -0.27 -0.21 0.06 -0.22 Dp Bs -0.44* -0.19 0.10 0.13 0.38 -0.04 0.20 0.15 0.13 0.62** -0.13 0.37 0.16 0.76** 0.39* 0.02 0.42* Io -0.57** 0.34 0.36 0.57** 0.45* 0.12 0.13 Gp -0.07 -0.44* -0.22 -0.09 -0.16 0.17 * Correlation is significant at the 0.05 level (1-tailed) **Correlation is significant at the 0.01 level (1-tailed) 36 ea lvg astsz 0.33 0.45* -0.04 0.13 0.41* 0.32 0.26 0.40* 0.39* 0.39* 0.12 0.64** pftab 0.05 0.31 multilis 0.12 sholders European Journal of Developing Country Studies, Vol.9 2010 ISSN(paper)2668-3385 ISSN(online)2668-3687 www.BellPress.org Multicollinearity in the independent variables had been diagnosed through bivariate analysis The above table represents the correlation matrix of the dependent and independent variables Judge et al (1985) and Bryman and Cramer (1997) suggested that simple correlation between independent variables should not be considered harmful until they exceed 0.80 or 0.90 The highest value of the observed correlations is 0.76; therefore, the observed correlations are not harmful These finding suggest that multicollinearity between independent variables is unlikely to pose a serious problem in the interpretation of the results of the multivariate analysis 6.4 ANOVA Technique One way ANOVA technique was used to have a concrete outcome of accepting or rejecting the hypothesis The following table shows the ANOVA and the level of significant at percent Table- 6: ANOVA (b) model Regression Residual Total sum of squares 0.097358001 0.021241999 0.1186 df 11 19 mean square 0.008850727 0.00265525 a sig 3.3332935 0.049186143 predictors: (constant), sholders, multilis, io, bi, dp, ea, gp, profitab, lvg, asstsz, bs b F dependent variable: odi The table-6 gives us a direction regarding the acceptance or rejection of hypothesis P value indicates that there is a significant relationship between corporate governance and overall disclosure index Therefore, null hypothesis (Ho) is rejected 6.5 Empirical Model It is already observed from the above analysis that there is a relationship between corporate governance and the extent of disclosure, but the effect of each variable on the disclosure level is still unknown at this stage The following Ordinary Least Square (OLS) regression model is developed in order to identify the effect of each variable on the disclosure level Where, 37 European Journal of Developing Country Studies, Vol.9 2010 ISSN(paper)2668-3385 ISSN(online)2668-3687 www.BellPress.org ODI = Overall Disclosure Index α = the intercept ε = the error term In regression analysis, the enter method of Statistical Package (SPSS) was used in order to verify the influence of independent variable that were chosen for the study over the dependent variable The summary output of the model for the all sample companies is shown in the following table Table – 7: Model Summary Model R R Square Adjusted R Square Std Error of the Estimate 906(a) 0.821 0.575 0.05153 a Predictors: (Constant), sholders, multilis, io, bi, dp, ea, gp, profitab, lvg, asstsz, bs The adjusted coefficient of determination of R2 indicates that around 57 percent of the variation in the dependent variable is explained by variations in the independent variables Thus the model is capable of explaining 57 percent variability of disclosed information in the annual reports of sample companies Table- 8: Coefficients (a) Model Variables (Constant) Bi Dp Bs Io Gp Ea Lvg Asstsz Profitab Multilis Sholders A Unstandardized Coefficients B 0.438 0.001 0.007 -0.005 0.000 0.001 0.092 0.006 0.000 0.001 0.161 0.000 Std Error 0.175 0.002 0.072 0.025 0.001 0.001 0.038 0.056 0.000 0.000 0.058 0.000 Dependent Variable: odi 38 Standardized Coefficients T Sig 2.495 0.340 0.097 -0.189 0.131 0.944 2.414 0.103 -0.138 2.500 2.752 -0.012 0.037 0.743 0.925 0.855 0.899 0.373 0.042 0.921 0.894 0.037 0.025 0.991 Beta 0.093 0.042 -0.118 0.038 0.250 0.519 0.032 -0.058 0.611 0.455 -0.003 European Journal of Developing Country Studies, Vol.9 2010 ISSN(paper)2668-3385 ISSN(online)2668-3687 www.BellPress.org It is observed that external auditor, profitability and multi listing are significantly associated with disclosures level The coefficient of external auditor, profitability and multi listing are statistically significant at percent level The board independence, board size, dominant personality, institutional ownership, general public, leverage, assets size, and number of shareholders are not statistically significant even at 10 percent level Discussions The purpose of the current study is to examine the level of financial disclosures among Bangladeshi companies and its association with corporate governance characteristics On the whole, the study concludes that the level of financial disclosures in Bangladesh is increasing gradually but it is still below the level of expectation Besides, the reliability and transparency level of financial disclosures is very low and hence the confidence level of external users’ is also at a very low stage Therefore, shareholders not use the information provided in the annual report in making their economic decisions as they not have confidence on it The study found that there is an association between corporate governance characteristics and the level of financial disclosures The authors used six corporate governance variables in the current study Only the association between external auditor and the level of financial disclosures is found significant In support of agency-theory and involvement of competent auditors’, the authors provide evidence of the ability of a competent auditor to influence corporate financial disclosures reporting World Bank report stated that audits are not reviewed in Bangladesh and many market participants are skeptical of audit quality There are some key weaknesses in the non-financial disclosure frame work, especially in the disclosure of ownership and control Other variables such as board independence, board size, dominant personality, institutional ownership and general public are not significantly associated with the level of financial disclosures The weakness of these variables indicates that corporate governance structure of Bangladesh is weak World Bank (2009) assessed corporate governance scenario in Bangladesh According to the report, ‘some companies have one independent director, some have none, board size is about to members, ownership is concentrated by a small number of related shareholders- sponsors held 43 percent of the market, general public held 38 percent and institutional investors held 10 percent’ The WB report clearly shows that board 39 European Journal of Developing Country Studies, Vol.9 2010 ISSN(paper)2668-3385 ISSN(online)2668-3687 www.BellPress.org independence, board size, institutional ownership and general public are not in a position to influence corporate financial reporting disclosures The more powerful the stakeholders, the more prepared the company to adapt to meet the stakeholders expectations (Cotter, 2011) According to this statement, only concentrated ownership has the power to influence the level of corporate financial reporting disclosures in Bangladesh Stakeholders’ theory typically views the world from the perspective of the management of the organization who are concerned strategically with the continued success of the company (Roberts, 1992) External users rely on the report provided by external auditor as they cannot access to the information of companies directly These external users would like to have more relevant and reliable information which is used in making their economic decisions According to agency theory, there exists a conflict of interest between concentrated ownership and external users Again, as per stakeholder theory, a company’s continued existence needs the support of its stakeholders and their approval must be sought and the activities of the corporation be adjusted to meet their expectations (Cotter, 2011) Thus, the management of corporations always tries to make them successful by providing a rosy picture of companies Under these circumstances, the opinion about the financial disclosures of external auditor plays an important role to the external users The primary objective of appointing an external auditor is to protect the right of external stakeholders by producing a true and reliable audit report In Bangladesh, external auditors work for clients like other employees and their activities cannot protect the right of external stakeholders and this is the only reason for which external stakeholders not fully rely on annual report in making their economic decisions It is commonly believed that auditors are working only for their own incentives and companies disclose information only to comply with the SEC rules and regulations But, SEC does not examine the compliance of financial disclosures and corporate governance code Consequently, the image of external auditor in Bangladesh is degrading day by day Although concentrated ownership has the power to influence the level of corporate disclosures but they not have sufficient knowledge about accounting and financial reporting in Bangladesh External auditor (an expert in accounting, reporting and auditing) is the only authority (as per the Companies Act 1994) to certify the financial statements of limited companies External stakeholders are to rely on the audit report Obviously, the audit report is an influential factor about level of disclosures, reliability, relevancy, consistency, transparency and so on But, 40 European Journal of Developing Country Studies, Vol.9 2010 ISSN(paper)2668-3385 ISSN(online)2668-3687 www.BellPress.org external users not have faith on audited financial statements and disclosures In the International Conference of Chartered Accountants in Dhaka, the Honourable President of the People’s Republic of Bangladesh Md Zillur Rahman (2010) warned the professional accountants that “The government mostly depends on direct and indirect taxes to meet budget expenditure but many individuals or institutions for avoiding the tax amounts prepare their balance sheets in ways which not reflect the real accounts,” Again in 19th Convocation organized by ICAB, President Md Zillur Rahman (2011) urged the Chartered Accountants to show utmost honesty and integrity alongside their professionalism in preparing the financial statements for government and corporate entities He opined that the professional Chartered Accountants must always work to ensure transparency and accountability Therefore, the result of our study is fully supported by the assumptions of external stakeholders and others Conclusion It is evident from the above discussion that external auditor, a corporate governance variable, can significantly influence the level of corporate financial disclosures Other variables, such as, board independence, board-size, dominant personality, institutional ownership and general public are not meaningfully associated with the level of financial disclosures As such, the corporate governance structure in Bangladesh is not at the acceptable level Finally, there is a potential limitation in the present study that needs to be acknowledged Board competencies, family ownership, managerial ownership, competencies of audit committee members and so on have not been included in corporate governance variables as these disclosures were not available in the corporate annual report There are also some key weaknesses in the non-financial disclosure frame work, especially in the disclosure of ownership and control (WB, 2009) Opportunities for Further Research Findings of this study warrant further investigation on corporate governance scenario in Bangladesh An empirical study can be conducted by applying survey method as the data required to measure corporate governance is not available in corporate annual reports In this context, it is essential to collect data by using governance & transparency index (GTI) 41 European Journal of Developing Country Studies, Vol.9 2010 ISSN(paper)2668-3385 ISSN(online)2668-3687 www.BellPress.org Acknowledgement The authors acknowledge the involvements and comments of following well-known researchers in the field: Richard Heaney, University of Western Australia, Zahirul Hoque, La Trobe University, Australia, Kamran Ahmed, La Trobe University, Australia, Asheq Rahman, Massey University, New Zealand, Omar Al Farooque, University of New England, Australia, Jill Solomon, King’s College, London, UK References: Abd Elsalam (1999) cited in Jahangir Alam (2008) Financial disclosure in developing countries with special reference to Bangladesh Doctoral Dissertation, University of Ghent, Belgium Abdullah, S N (2006) Board structure and ownership in Malaysia: The case of distressed listed companies Corporate Governance, 6(5): 582-594 Adelberg, A H (1979) Narrative disclosures contained in annual reports: means of communication or manipulation Accounting and Business Research, 10 (Summer): 179-189 Ahmed Alim Al Ayub (2009) Compliance of financial disclosure in corporate annual reports of banking sector in Bangladesh Doctoral Dissertation, University of Rajshahi Ahmed, K., Hossain, M & Adams, M (2006) The effects of board composition and board size on the informativeness of annual accounting earnings Corporate Governance: An International Review, 14, (5): 418431 Ahmed, K and Des Nicholls (1994) The impact of nonfinancial company characteristics on mandatory disclosure compliance in developing countries: The case of Bangladesh The International Journal of Accounting Education and Research, 29: 62-77 Ahmed, K and Courtis, J K (1999) Association between corporate characteristics and disclosure levels in Annual Reports: A Meta-Analysis, British Accounting Review, 31(1): 35-61 Alam, Jahangir (2008) Financial Disclosure in Developing Countries with Special Reference to Bangladesh Doctoral Dissertation, University of Ghent, Belgium Apostolou, K Apostolos and Konstantinos A Nanopoulos.(2009) Voluntary accounting disclosure and corporate governance: evidence from Greek listed firms Int J Accounting and Finance, 1(4) Barako, D G., Hancock, P and Izan, H Y (2006) Relationship between Corporate Governance Attributable and Voluntary Disclosures in Annual Reports: The Kenyan Experience Financial Reporting, Regulation and Governance, 5(1): 1-25 Bartov, E., Radhakrisnan, S and I Krinsky (2000) Investor sophistication and patterns in stock returns The Accounting Review 75 (1): 43-63 Becker, C., DeFond, M., Jiambalvo, J & Subramanyam, K (1998) The Effect of Audit Quality on Earnings Management Contemporary Accounting Research, , 15: 1-24 42 European Journal of Developing Country Studies, Vol.9 2010 ISSN(paper)2668-3385 ISSN(online)2668-3687 www.BellPress.org Beekes, W., Pope, P & Young, S (2004) The Link between Earnings and Timeliness, Earnings Conservatism and Board Composition: Evidence from the UK Corporate Governance: An International Review 12: 14-59 Beasley, M.S (1996) An empirical analysis of the relation between the board of director composition and financial statement fraud The Accounting Review 71 (4) 443-465 Belkaoui A and Kahl A (1978) Corporate Financial Disclosure in Canada, Research Monograph No.1 of Canadian Certified General Accountants Association, Vancouver Belkaoui, A , Kahl A and Peyrard, J (1977) Information Needs of Financial Analysts: An International Comparison The International Journal of Accounting Education and Research, 13 (1) Bonn, I (2004) Board structure and firm performance: Evidence from Australia Journal of the Australian and New Zealand Academy of Management 10 (1): 14-24 Bradbury, M Mak, Y.& Tan S.(2006) Board characteristics, audit committee characteristics and abnormal accruals Pacific Accounting Review, 18: 47-68 Brown, J., Falaschetti, D & Orlando, M (2010) Auditor Independence and Earnings Quality: Evidence for Market Discipline Vs Sarbanes-Oxley Proscriptions American Law and Economics Review, 12 (1): 39-68 Bursha Malaysia (2006) Listing requirements of Bushra Malaysia Securities Berhad Available from http://www.bursamalaysia.com/website/bm/rules and regulations/listing requirements/downloads/LR_MBSB.pdf Bushee, B.J., Matsumoto D A., and Miller G.S (2003) Open versus closed conference calls: The determinants and effects of broadening access to disclosure Journal of Accounting and Economics 34: 149-180 Bushman, R M and Smith, A J (2001) Financial accounting information and corporate governance Journal of Accounting and Economics 32: 237-333 Byard, D., Li, Y & Weintrop, J.(2006) Corporate governance and the quality of financial analyst’s information Journal of Accounting and Public Policy, 25: 609-625 Cadbury Committee (1992) Report of the committee on the financial aspects of corporate governance London: Gee and Company Ltd Cerf, A R (1961) Corporate reporting and investment decisions.( University of California Press,1961) in A.K.M Waresul Karim (1996), “The Association between corporate attributes and the extent of disclosure in Bangladesh Dhaka University Journal of Business Studies, 17(2): 89-124 Cheng, E.C.M and Courtenay, S M (2004) Board composition, regulatory regime and voluntary disclosure Available from http://www.b.kobe-u.ac.jp/ coe/research/2005/illinois /pdf/ cheng%20and%20 Courtenay.pdfg Chen, C.J.P and Jaggi, B (2000) ‘ Association between independent non-executive directors, family control and financial disclosures in Hong Kong’ Journal of Accounting and Public Policy 19: 285-310 Chow, C W and Wong- Boren A (1987) Voluntary financial disclosure by Mexican corporations The Accounting Review, LX11 (3): 533-541 Chung, R., Firth, M & Kim, J.(2003) Auditor conservatism and reported earnings Accounting Business Research, 33: 19-32 Claessens, S and Fan, J P H (2002) Corporate governance in Asia : A survey International Review of Finance, 3(2): 71-103 43 European Journal of Developing Country Studies, Vol.9 2010 ISSN(paper)2668-3385 ISSN(online)2668-3687 www.BellPress.org Cooke, T E (1991) An assessment of voluntary disclosure in the annual report of Japanese Corporations, International Journal of Accounting Education and Research 26: 174-189 Cooke T E (1989) Disclosure in the corporate annual reports of Swedish companies Accounting and Business Research, 19(74):113-124 Cooke T E (1992) The impact of size, stock market listing and industry type and disclosure in the annual report of Japanese listed corporations Accounting and Business Research, 22(87): 221-237 Cooke T E (1993) Disclosure in Japanese corporate annual reports Journal of Business Finance and Accounting 20 (4): 521-535 Chaganti, R S., Mahajan, V Sharma, S (1985) Corporate board size, composition and corporate failures in retailing industry Journal of Management Studies, 22(4): 400-417 Cotter, Julie and Muftah M Najah (2011) Institutional investor influence on global climate change disclosure practices Australian Journal of Management, 1-19 DeAngelo, I (1981) Auditor size and audit quality Journal of Accounting and Economics 3: 183-199 Daily, C.M., Dalton, D.R and Cannella Jr., A A.(2003) Corporate governance : Decades of dialogue and data Academy of Management Review 28 (3): 371-382 Dechow,P.M., Solan, R.G and Sweeney, A.P (1996) Causes and consequences of earnings manipulation: An analysis of firms subject to enforcement actions by the SEC Contemporary Accounting Research 13(1): 1-36 Dwevedi, N and Jain, A.K (2005) Corporate governance and performance of Indian firms: The effect of board size and ownership Employee Responsibilities and Rights Journal 17 (3): 161-172 Eng, L.L., and Mak, Y T (2003) Corporate governance and voluntary disclosure Journal of Accounting and Public Policy 22: 325-345 Fama,E and Jensen,M (1983) Separation of ownership and control Journal of Law and Economics 26 (2): 301-325 Firth, M (1979) The Impact of Size, Stock market listing and auditors and volume disclosure in corporate annual reporting, Accounting and Business Research, Autumn, 273-280 Firth, M., Fung, P & Rui, O (2007).Ownership, two-tier board structure, and the informativeness of earnings: Evidence from China Journal of Accounting and Public Policy 26 (4): 463-496 Gul, F.A and Leung, S (2004) Board leadership, outside directors’ expertise and voluntary corporate disclosures Journal of Accounting and Public Policy 23(5): 351-379 Halim, R (2001) My Say: Malaysian corporate governance: The solution The Edge Daily July, Error! Hyperlink reference not valid Halme, M and Huse, M (1997) The influence of corporate governance, industry and country factors on environmental reporting Scandinavian Journal of Management 13(2): 137-157 Hasan (2011) Disclosure of financial reporting and users’ perception in Bangladesh Unpublished Doctoral Dissertation, University of Rajshahi Hermanson, D R.(2003) Does corporate governance really matter? What the research tells us Internal Auditing 18(2): 44-45 44 European Journal of Developing Country Studies, Vol.9 2010 ISSN(paper)2668-3385 ISSN(online)2668-3687 www.BellPress.org Md Zillur Rahman (2010) CAS role vital for economic uplift, says President ICAB News Bulletin No.250 Md Zillur Rahman (2011) President urges CAs to work responsibly, honestly ICAB News Bulletin No.264 Ho, S.S.M and Wong, K.S (2001) A study of the relationship between corporate governance structure and the extent of voluntary disclosure Journal of International Accounting, Auditing and Taxation 10(2): 139-156 Horngren, C.T (1957) cited in Jahangir Alam (2008) Financial disclosure in developing countries with special reference to Bangladesh Doctoral Dissertation, University of Ghent, Belgium Hossain (1998) Disclosure of financial information in developing countries: A comparative study of nonfinancial companies in India, Pakistan and Bangladesh Ph.D Dissertation School of Accounting and Finance, Victoria University of Manchester, U.K, July 1998 Hossain et al (1995) Financial Management (in Bengali), Angel Publication: Dhaka International Federation of Accountants – IFAC (2010) IFAC comment letter: Transparency of firms that audit public companies: Consultation Report, [Online] Available: http://web.ifac.org/publications/ifac-policyposition-papers-reports-and-comment-letters/comment-letters#ifac-c omment-letter-transp on 29/01/2010 Inchausti, B.G (1997) The influence of company characteristics and accounting regulations on information disclosed by Spanish firms The European Accounting Review, 1(1): 45-68 Jensen, M & Meckling, W (1976) Theory of the firm: Managerial behavior, agency costs, and ownership structure Journal of Financial Economics 3(4): 305-360 Jensen, M.(1993) The modern industrial revolution, exit, and the failure of internal control systems Journal of Finance 25 (3): 831-873 Jiambalvo, J., Rajgopal, S & Venkatachalam, M (2002) Institutional ownership and the extent to which stock prices reflect future earnings, Contemporary Accounting Research 19 (1): 117-145 Karim, A.K.M Waresul (1996) The association between corporate attributes and the extent of disclosure in Bangladesh Dhaka University Journal of Business Studies, 17(2) Kelton, A and Y Yang (2004) The impact of corporate governance on internet financial reporting http://web.chapman.edu/asbe/faculty/bdehning/JISNSRW/2005/010%20Kelton.pdf Leftwich, R., Watts, R., and Zimmerman, J (1981).Voluntary corporate disclosure: Tthe case of interim reporting, Journal of Accounting Research, 19: 50-77 Levitt, A (1998) The numbers game Remarks delivered at the NYU Center for Law and Business New York, NY, September 28 [Online] Available: http://www.sec.gov/news/speech/speecharchive/1998/spch220.txt on 12/10/2009 Levitt, A (2000) Speech by SEC chairman: Remarks before the conference on the rise and effectiveness of new corporate governance standards, Federal Reserve Bank, New York, [Online] Available: http://www.sec.gov/news/speech/spch449.htm on 19/10/2009 Li, J (1994) Ownership structure and board composition: A multi-country test of agency theory predictions Managerial and Decision Economics.15: 359-368 McKinsey & Company (2002) Global investor opinion survey: Key findings London McKinsey & Company, McConomy, B., & Bujaki, M (2000) Corporate governance: Enhancing shareholder value CMA Management, 74(8): 10-13 45 European Journal of Developing Country Studies, Vol.9 2010 ISSN(paper)2668-3385 ISSN(online)2668-3687 www.BellPress.org McMullen D.A (1996) Audit committee performance: an investigation of the consequences associated with audit committees Auditing: A Journal of Practice & Theory, 15(1): 87–103 Mallin, C (2003) The relationship between corporate governance, transparency and financial disclosure In Selected Issues in Corporate Governance: Regional and Country Experiences United Nations Conference on Trade and Development, New York and Geneva, 1-10 Malone et al (1993) cited in Jahangir Alam (2008) Financial disclosure in developing countries with special reference to Bangladesh Doctoral Dissertation, University of Ghent, Belgium Marston, C.L and Shrives, P.J (1996) A review of the development and use of explanatory models in financial disclosure studies, Paper presented at the EAA Congress, Bergen, Norway Mautz, Robbert K and Hussein A Sharaf (1961) The philosophy of auditing Evanston III: AAA McNally, G.M., L.H Eng and C.R Hasseldine (1982) Corporate financial reporting in New Zealand: An analysis of the preferences, corporate characteristics and disclosure practices for discretionary information Accounting and Business Research Winter Meek et al (1995) cited in Jahangir Alam (2008) Financial disclosure in developing countries with special reference to Bangladesh Doctoral Dissertation, University of Ghent, Belgium Meek, G K and Gray, S J (1989) Globalization of stock markets and foreign listing requirements: voluntary disclosure by continental European companies listed on the London Stock Exchange Journal of International Business Studies 20 (2): 296-314 Millstein, I M (1999) Introduction to the report and recommendations of the Blue Ribbon Committee on improving the effectiveness of corporate audit committees Business Lawyer, 54(3): 1097-1111 Mittoo, (1992) cited in Jahangir Alam (2008) Financial disclosure in developing countries with special reference to Bangladesh Doctoral Dissertation, University of Ghent, Belgium National Investor Relations Institute (NIRI) (2000) Web disclosure practice is still unfolding, IR Update, February 2000, 18 Norita, M N and Shamsul-Nahar, A (2004) Voluntary disclosure and corporate governance among distressed firms in Malaysia Financial Reporting, Regulation and Governance, 3(1) Available from http://www.cbs.curtin.edu.au/files/nasir-abdullah.pdf OECD (2004) OECD Principles of Corporate Governance Petra, S (2007) The effect of corporate governance on the informativeness of earnings Economics of Governance 8: 129-152 Raffournier (1995) The determinants of voluntary financial disclosure by Swiss listed companies The European Accounting Review, 4(2): 261-280 Razzaque S I M A (2004) Financial reporting and corporate governance in Bangladesh: A study on some manufacturing companies listed in the Dhaka Stock Exchange Ltd Doctoral Dissertation Institute of Bangladesh Studies, University of Rajshahi Raphaelson, I H and Wahlen, J (2004) Effective compliance program in the aftermath of corporate mega scandals Insights: the Corporate & Securities Law Advisor 18 (5): 12-18 46 European Journal of Developing Country Studies, Vol.9 2010 ISSN(paper)2668-3385 ISSN(online)2668-3687 www.BellPress.org Roberts et al (1998) Cited in Jahangir Alam (2008) Financial disclosure in developing countries with special reference to Bangladesh Doctoral Dissertation, University of Ghent, Belgium Journal of Accounting Research, Autumn, 24(2): 412-421 Roberts R W (1992) Determinants of corporate social responsibility disclosure: An application of stakeholder theory Accounting, Organizations and Society 17(6): 595-612 Robbins, W A and Austin, K R (1986) Disclosure quality in governmental financial reports: An assessment of the appropriateness of a compound measure Journal of Accounting Research 24 (2): 261-280 Securities and Exchange Commission, Bangladesh (2006) Corporate governance codes Available at http://www.secbd.org/Corporate%20Governance%20Code%20_Final%2020%20Feb06.pdf Share Market Inquiry Report (2011) Available http://www.mof.gov.bd/en/index.php?option=com_content&view=article&id=169&Itemid=1 at Singhvi, S S (1967) Corporate disclosure through annual reports in the USA and India Doctoral Dissertation Graduate School of Business, Columbia University Singhvi, S S and Harsha B Desai (1971) An empirical analysis of quality of corporate financial disclosure The Accounting Review, January 129-138 Suwaidan (1997) cited in Jahangir Alam (2008) Financial disclosure in developing countries with special reference to Bangladesh Doctoral Dissertation, University of Ghent, Belgium Teoh,S & Wong, T (1993) Perceived auditor quality and the earnings response coefficients The Accounting Review 68: 346-367 Vafeas, N (2000) Board structure Policy.19: 139-160 and informativeness of earnings Journal of Accounting and Public Wallace, W.A (1980) The economic role of the audit in free and regulated markets, Touche Ross & Co Aid to Education Program Wallace and Naser (1995) 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: 311-68 Wallace, Naser and Mora (1994) The relationship between the comprehensiveness of corporate annual reports and firm characteristics in Spain Accounting and Business Research 25(97): 41-53 Wan Hussin, W.N and Ibrahim, M A (2003) Striving for quality financial reporting Akauntan Nasional, March 18-24 Watts, R and Zimmerman, J (1978) ‘Towards a positive theory of the determination of accounting standards’, The Accounting Review, 53: 112–134 Watts, R & Zimmerman, J (1983) Agency Problems, Auditing and the Theory of the Firm: Some Evidence Journal of Law and Economics 26: 613-634 World Bank (2009) Corporate governance, Country Assessment, Bangladesh, March Xie, B., Davidson, W.N and Dalt, P.J (2001) Earnings management and corporate governance: The roles of the board and the audit committee Available at http://SSRN.com/ Abstract=304195 47 ... http://web.ifac.org/publications/ifac-policyposition-papers-reports -and- comment-letters/comment-letters#ifac-c omment-letter-transp on 29/01 /2010 Inchausti, B.G (1997) The influence of company characteristics and accounting... 1994) Recent empirical works on the association between traditional financial reporting disclosures and corporate governance Chen and Jaggi (2000) and Eng and Mark (2003) Chen and Jaggi (2000) find... decisions and 52 percent of respondents identify that improving financial reporting quality is a governance priority for policymakers Good governance goes hand-in-hand with reduced risk of financial reporting