Ekonomski pregled, Vol. 74 No. 4, 2023.
Prethodno priopćenje
https://doi.org/10.32910/ep.74.4.5
CORRELATION OF PROFITABILITY AND INDEBTEDNESS WITH THE LEVEL OF DISCLOSURES IN CASE OF MEDIUM AND LARGE COMPANIES
Ana Rep
Sanja Sever Mališ
Mateja Brozović
Sažetak
Reporting is one of the main mechanisms of corporate governance. The question is how certain characteristics of a company affect the level of voluntary disclosure. Accordingly, the aim of this paper is to investigate the direction and strength of the relationship between profitability and indebtedness of companies on the one hand and the level and quality of voluntary disclosure of information on the other. A review of previous research has shown that different researchers have come to different conclusions about the relationship between these variables. However, it can be expected that companies are more inclined to voluntarily publish information that is in their favour, i.e., to avoid publishing information that could harm them. Therefore, this paper is based on the assumptions that more profitable companies publish more voluntary information with the intention of attracting investors, as well as that more indebted companies publish less voluntary information. The research was conducted on a sample of 40 medium and large companies registered in Croatia using regression analysis. The dependent variable is the voluntary disclosure index, which consists of 50 items and is constructed based on previous studies but modified in line with the content analysis of annual reports and other published non-financial reports for the year 2017. The main independent variables are return on equity and the debt ratio, accompanied with the control variables in the form of company size and type of audit firm. The results showed that the direction of correlation between the dependent variable and the main independent variables was in accordance with the set hypotheses. In other words, a positive correlation was observed between the return on equity and the disclosure index, together with a negative correlation between the debt-to-assets ratio and the disclosure index. However, the correlation is not statistically significant with a significance level of 5 %. Although the research hypotheses were not accepted, the conducted research showed that companies in Croatia understand the importance of transparent reporting. The limitation of the research consists in a partially subjective approach when performing content analysis of the reports and calculating the disclosure index. Future research can be improved by increasing the sample and the number of independent variables in the regression model.
Ključne riječi
voluntary reporting; transparency; annual report; non-financial reports; profitability; indebtedness; disclosure index
Hrčak ID:
304626
URI
Datum izdavanja:
23.6.2023.
Posjeta: 411 *