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Voluntary disclosure and risk in an emerging market

Voluntary disclosure and risk in an emerging market Purpose – This paper seeks to examine the association between corporate voluntary disclosure and systematic (market or beta) risk for a sample of Egyptian listed companies. Design/methodology/approach – Using panel data analysis, beta is regressed on the level of voluntary disclosure and the following control variables: dividend payout, asset growth, gearing, firm size and book‐to‐market ratio. Findings – The results generally show a negative relationship between voluntary disclosure level and beta, consistent with predictions of a differential information model and theories about the economic consequences of increased disclosure. The results are dependent on the specification of the model and the market index used to estimate beta, suggesting a need for further research on the link between risk and voluntary disclosure in the context of emerging markets. Practical implications – The main implication of these results is that more voluntary information about listed companies seems preferable to less in order to reduce the perceived riskiness of a company. This should act as an incentive for listed companies to enhance public disclosure. Originality/value – This is one of the first studies to explore the economic consequences of increased disclosure in an emerging capital market using panel data analysis. Another distinctive feature is that market betas are estimated using different measures to obtain greater confidence in the overall conclusions. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Accounting in Emerging Economies Emerald Publishing

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Publisher
Emerald Publishing
Copyright
Copyright © 2011 Emerald Group Publishing Limited. All rights reserved.
ISSN
2042-1168
DOI
10.1108/20421161111107840
Publisher site
See Article on Publisher Site

Abstract

Purpose – This paper seeks to examine the association between corporate voluntary disclosure and systematic (market or beta) risk for a sample of Egyptian listed companies. Design/methodology/approach – Using panel data analysis, beta is regressed on the level of voluntary disclosure and the following control variables: dividend payout, asset growth, gearing, firm size and book‐to‐market ratio. Findings – The results generally show a negative relationship between voluntary disclosure level and beta, consistent with predictions of a differential information model and theories about the economic consequences of increased disclosure. The results are dependent on the specification of the model and the market index used to estimate beta, suggesting a need for further research on the link between risk and voluntary disclosure in the context of emerging markets. Practical implications – The main implication of these results is that more voluntary information about listed companies seems preferable to less in order to reduce the perceived riskiness of a company. This should act as an incentive for listed companies to enhance public disclosure. Originality/value – This is one of the first studies to explore the economic consequences of increased disclosure in an emerging capital market using panel data analysis. Another distinctive feature is that market betas are estimated using different measures to obtain greater confidence in the overall conclusions.

Journal

Journal of Accounting in Emerging EconomiesEmerald Publishing

Published: Feb 22, 2011

Keywords: Voluntary disclosure; Financial risk; Emerging markets; Egypt

References