An Empirical Analysis of the Voluntary Disclosure Practices of Unired Arab Emirates Listed Companies in an International Financial Reporting Standards Environment

  • Suja Sarah THOMAS Al Ghurair University, United Arab Emirates
  • Ibrahim Elsiddig AHMED Ajman University, United Arab Emirates

Abstract

This study explores the voluntary disclosure practices of UAE listed companies in the current IFRS environment and compares them with international best practices as revealed by extant literature. For the purpose of the study a voluntary disclosure checklist was designed. The checklist was based on instruments used extensively in mature markets and tailored to the needs of an ‘emerging’ market economy in view of the vulnerability of emerging market stocks to extensive disclosures. An important reference point is that IFRS disclosures requirements are periodically revised. Hence, disclosures that have now become ‘statutory’ under IFRS reporting have not been included in the checklist. Data were collected by empirically examining the annual reports of listed companies in the UAE stock markets over a five year period, 2010 to 2014, and analyzed statistically to derive significant relationships. It is clear that legal requirements shape much of the disclosure practices in the UAE markets. Results of the analysis showed that large companies especially in the financial services sector score high on the voluntary disclosure index. The overall index falls in the range of 10 to 30. Other companies including SMEs have also begun to realize the benefits of transparency in financial reporting.

References

[1] Akhtaruddin, M., Hossain, M.A., Hossain M., Yao, L. 2009. Corporate governance and voluntary disclosure in corporate annual reports of Malaysian listed firms. Journal of Applied Management Accounting Research, 7(1): 1-19. DOI: http://www.monirulhossain.com/images/papers/articles_already_published/articles_already _published_11.pdf
[2] Akman, N.H. 2011. The Effect of IFRS Adoption on Financial Disclosure: Does Culture Still Play A Role? American International Journal of Contemporary Research. 1(1): 6-17. Available at: http://www.aijcrnet.com/ journals/Vol._1_No.1_July_2011/2.pdf
[3] Alfraih, M.M. and Alanezi, F.S. 2015. The value relevance of mandatory corporate disclosures: Evidence from Kuwait. International Journal of Business and Finance Research. 9(3): 1-18. Available at: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2654941
[4] Augustine, B.D. 2012. GCC banks close to pre-crisis levels of profitability. Gulf News,15 March. Available at: https://gulfnews.com/business/sectors/banking/gcc-banks-close-to-pre-crisis-levels-of-profitability-1.994707
[5] Ayaydin, H., and Karakaya, A. 2014. The effect of bank capital on profitability and risk in Turkish banking. International Journal of Social Science. 5(1): 252-271. Available at: http://www.ijbssnet.com/journals/Vol_5_ No_1_January_ 2014/29.pdf.
[6] Balakrishnan, K., Li, X. and Yang, H. 2012. Mandatory Financial Reporting and Voluntary Disclosure: Evidence from Mandatory IFRS Adoption. (Unpublished report). Available at: https://pdfs.semantic scholar.org/6235/504ebbc15fc7671a9f31948ecd3105315130.pdf?_ga=2.188678635.2140272350.15389124 26-460021698.1538912426.
[7] Barako, D.G. 2007. Determinants of voluntary disclosures in Kenyan companies annual reports. African Journal of Business Management, 1(5): 113-128.
[8] Bradford, M. 2007. Banks take effective efforts to manage core risks. Business Insurance, 41(35): 14: Available at: http://search.proquest.com/docview/233514993?accountid=45262
[9] Bragg, S.M. 2013. IFRS Guidebook. Accounting Tools LLC, Colorado: Centennial. ISBN-10: 1938910079, ISBN-13: 9781938910074, 474 pp.
[10] Campbell, D. and Slack, R. 2008. Narrative Reporting: Analysts’ Perceptions of its Value and Relevance. Research Report 104, Research Monograph, The Association of Chartered Certified Accountants (ACCA), London.
[11] Chen, H., Shia, B., and Lee, H. 2012. A comparative analysis of credit risk management models for banking industry using simulation. International Journal of Operational Management Marketing and Services. 2(1): 107-114, Available at: http://search.proquest.com/docview/1413262112?accountid=45262
[12] Colman, R. 2004.The narrative reporting debate. CMA Management, 78(7): 53 - 64.
[13] Courtis, J.K. 2004b. Color as visual rhetoric in financial reporting. Accounting Forum, 28(3): 265–281.
[14] Danjou, P. 2011. The legitimacy of the international accounting standard-setter: Comments on international accounting standardization: The return of politics? Comptabilite’ Contro^le-Audit, 3(17):14-15.
[15] Deumes, R. and Knechel, W.R. 2008. Economic incentives for voluntary reporting on internal risk management and control systems. Auditing: A Journal of Practice & Theory, 27(1): 35-66.
[16] Elzahar, H. and Hussainey, K. 2012. Determinants of narrative risk disclosures in UK interim reports. The Journal of Risk Finance, 13(2): 133-147. DOI: https://doi.org/10.1108/15265941211203189
[17] Feres de Almeida, J.E., Rodrigues H.S. 2015. Effects of IFRS, analysts and ADR on voluntary disclosure of Brazilian public companies. Journal of International Accounting Research: 16 (1): 21-35. Available at: http://www.portalfea.fea.usp.br/sites/default/files/arquivos/anexos/voluntary_disclosure_ze_herbert_05 _2015.pdf
[18] Fletcher H.D. and Smith D.B. 2004. Managing for value: Developing a performance measurement system integrating economic value added and the Balanced Scorecard in strategic planning. Journal of Business Strategies, 21: 1-17.
[19] Gonsalvis, C. 2012. Financial Reporting Quality and Corporate Governance: The Portugese Evidence: Available at: http://www.aeca1.org/pub/on_line/comunicaciones_xvcongresoaeca/cd/79c.pdf
[20] Hall, C. 2013. UAE and Qatar gain upgrade to Emerging Market status: Available at: http://www.ft.com/intl/ cms/s/0/3da7e2c0-d342-11e2-b3ff-00144feab7de.html#axzz3wX2dQAQO
[21] Harris, J. and Rentfro, R. 2008. Living Up to the Spirit of Narrative Reporting Guidance: Certified Public Accountant. The CPA Journal, 78(7): 24.
[22] Hoogervorst, H. 2015. IASB Speech. Available at: http://www.ifrs.org/Alerts/Conference/Documents/2015/ Hans-Hoogervorst-Milan-speech-Nov-2015.pdf.
[23] Hutchinson, M. (ed.). 2009. Governance Issues in Accounting. Accounting Research Journal, 22(2): 89-92. DOI: http://dx.doi.org/10.1108/10309610910987466.
[24] Iatridis, G.E. 2012. Voluntary IFRS disclosures: Evidence from the transition from UK GAAP to IFRSs. Managerial Auditing Journal, 27(6): 573-597. DOI: http://dx.doi.org/10.1108/02686901211236409
[25] Linsley, P.M., Shrives, P.J. and Crumpton, M. 2006. Risk disclosure: An exploratory study of UK and Canadian banks. Journal of Banking Regulation, 7(3): 268-282. DOI: https://doi.org/10.1108/18347640810887771
[26] Liou F. and Yang C. 2008. Predicting business failure under the existence of fraudulent financial reporting. International Journal of Accounting & Information Management, 16(1): 74-86.
[27] Meek, G.K., Roberts, C.B. and Gray, S.J. 1995. Factors influencing voluntary annual report disclosures by US, UK and continental European multinational corporations. Journal of International Business Studies, 26(3): 555. Available at: https://link.springer.com/article/10.1057%2Fpalgrave.jibs.8490186
[28] Rowbottom, N. and Lymer A. 2010. Exploring the use and users of narrative reporting in the online annual report. Journal of Applied Accounting Research, 11 (2): 90-108. Available at: https://core.ac.uk/download/pdf/ 9837486.pdf
[29] Scott, K. 2012. Working to ensure full disclosure. Gulf News Special Report, 3/11. Available at: https://www.pressreader.com/uae/gulf-news/20120311/287286069140228
[30] Sweiti, I.M. and Attayah O.F. 2013. Critical Factors Influencing Voluntary Disclosure: The Palestine Exchange “PEX”. Global Journal of Management and Business Research Finance, 13(6). Available at: https://journalofbusiness.org/index.php/GJMBR/article/view/1000/911
[31] Watts, R.L., Zimmerman, J.L. 1990. Positive accounting theory: A ten year perspective. Accounting Review, 65(1): 131-156. Available at: https://www.uam.es/personal_pdi/economicas/lcanibano/2007/Tema%208% 20T%20Positiva/Watts_Zimmerman_1990.pdf
[32] Young, B. 2011. Accounting and risk management: The need for integration. Risk Research Forum, Warwickshire. The Journal of Operational Risk. 6 (1): 37-53.
[33] Zaki, E., Bah, R. and Rao, A. 2012. Analysis of Financial crisis in UAE financial Markets. International Research Journal of Finance and Economic. Issue 83. Available at: http://hdl.handle.net/20.500.12216/176
*** Anon. 2012. Gulf states are heading for fiscal crisis in long run. The Oxford Analytica Daily Brief. 09/24. Available at: https://dailybrief.oxan.com/Analysis/DB178442/Gulf-states-are-heading-for-fiscal-crisis-in-long-run
*** ASB - The Accounting Standards Board. 2011. Rising to the challenge. A review of narrative reporting by UK based companies. Available at: https://www.frc.org.uk/Our-Work/Publications/ASB/Rising-to-the-Challenge/ Rising-to-the-challenge.aspx
*** G20/OECD Principles of Corporate Governance. 2014. 37-44 pp. http://dx.doi.org/10.1787/9789264236883-en.
*** IASB Report. 2015. IASB publishes draft guidance on applying the concept of materiality. Available at: http://www.ifrs.org/Current-Projects/IASB-Projects/Disclosure-Initiative/Materiality/Project-news/Pages/IASB-publishes-draft-guidance-on-applying-the-concept-of-materiality.aspx
*** PwC. 2009. A snapshot of FTSE 350 reporting. Available at: https://circabc.europa.eu/webdav/CircaBC/ FISMA/markt_consultations/Library/accounting/Non-financial-reporting/registered_organisations/EU_Price WaterhouseCoopers2_en.pdf.
*** The IFRS compliance, presentation and disclosure checklist. 2014. Available at: http://www.iasplus.com/en/ publications/global/models-checklists/2014/ifrs-checklist
Published
2018-11-26
How to Cite
THOMAS, Suja Sarah; AHMED, Ibrahim Elsiddig. An Empirical Analysis of the Voluntary Disclosure Practices of Unired Arab Emirates Listed Companies in an International Financial Reporting Standards Environment. Journal of Advanced Research in Management, [S.l.], v. 9, n. 1, p. 15-26, nov. 2018. ISSN 2068-7532. Available at: <https://journals.aserspublishing.eu/jarm/article/view/2439>. Date accessed: 21 mar. 2019. doi: https://doi.org/10.14505//jarm.v9.1(17).02.