Discretionary-based disclosure: evidence from the Brazilian market

Abstract

The primary objective of this paper is to identify the factors that explain Brazilian companies" level of voluntary disclosure. Underpinning this work is the Discretionary-based Disclosure theory. The sample is composed of the top 100 largest non-financial companies listed in the Bolsa de Valores de São Paulo (Brazilian Securities, Commodities, and Futures exchange -BOVESPA). Information was gathered from Financial Statements for the years ending in 2006, 2007, and 2008, with the use of content analysis. A disclosure framework based on 27 studies from these years was created, with a total of 92 voluntary items divided into two dimensions: economic (43) and socio-environmental (49). Based on the existing literature, a total of 12 hypotheses were elaborated and tested using a panel data approach. Results evidence that: (a) Sector and Origin of Control are statistically significant in all three models tested: economic, socio-environmental, and total; (b) "Profitability" is relevant in the economic model and in the total model; (c) Tobin"s Q is relevant in the socio-environmental model and in the total disclosure model; (d) Leverage and Auditing Firm are only relevant in the economic disclosure model; (e) Size, Governance, Stock Issuing, Growth Opportunities and Concentration of Control are not statistically significant in any of the three models.

Voluntary disclosure in the context of convergence with International Accounting Standards in Brazil

“…The variable IND is statistically significant showing that companies which belong to regulated industries (24 companies, 66 companies in the sample) have a positive differential in the voluntary disclosure level if compared to other companies. Murcia and Santos (2012) also documented positive relationship between voluntary disclosure and companies in the electricity sector.…”

“…Yet other variables may also positively influence corporate voluntary disclosure, such as leverage in the capital structure (Depoers, 2000, Lima, 2009Murcia & Santos, 2012); potential for profitability (Wallace & Naser, 1995;Dye, 2001); growth opportunity (Lopes & Alencar 2010;Murcia & Santos, 2012;Almeida and Rodrigues, 2015); liquidity of stock (Leuz & Verrecchia, 2000;Almeida & Rodrigues, 2015); corporate size (Wallace & Naser, 1995;Depoers, 2000;Leuz & Wysocki, 2008); corporate governance (Silveira et al 2009;Murcia & Santos, 2012); and industry regulation (Murcia & Santos, 2012). Nevertheless, companies with high ownership concentration may have reduced interest in the provision of information to the market, because a communication policy, even if restricted, meets a significant part of demand of shareholders (Leuz, 2006;Lopes & Alencar, 2010;Murcia & Santos, 2012;Almeida & Rodrigues, 2015).…”

“…Nevertheless, companies with high ownership concentration may have reduced interest in the provision of information to the market, because a communication policy, even if restricted, meets a significant part of demand of shareholders (Leuz, 2006;Lopes & Alencar, 2010;Murcia & Santos, 2012;Almeida & Rodrigues, 2015).…”

“…Thus, companies increase the level of voluntary disclosure in order to reduce the information asymmetry and thus take advantages of the benefits associated with greater stock liquidity and lower cost of capital (Leuz&Verrecchia, 2000;Botosan, 2004Botosan, , 2006Lima, 2009;Lopes & Alencar, 2010).There are also factors that explain differences in the voluntary disclosure level among companies, many of which related to specific features. In Brazilian capital market, Murcia and Santos (2012) found that industry, control of origin, profitability, leverage and external audit significantly influence voluntary disclosure. On the other hand, company size, corporate governance and concentration of ownership control were not significant to have impact on it.…”

Firm characteristics and excellence in integrated reporting

“…It is expected that entities with greater growth opportunities tend to disclose more information than entities with lower growth opportunities (Murcia & dos Santos 2012). Entities that have greater growth opportunities are likely to need resources in the near future.…”