Can self-regulation work in environments of high corruption?

Purpose - The purpose of this paper is to investigate if market discipline and legal environment are sufficient to motivate firms to disclose optimal level of corporate information voluntarily in the context of a developing country that is Pakistan. Furthermore, it was examined if regulators have sufficient regulatory capacity to influence the extent up to which politically connected companies disclose corporate information. Design/methodology/approach - An in-depth investigation was carried out through qualitative content analysis of 200 annual reports from 40 companies listed on Karachi Stock Exchange along with 26 semi-structured interviews from experts in the field of corporate governance. Findings - Findings from the research indicated that there is an absence of culture for disclosure of information and country’s existing institutional environment is not sufficiently strong to support self-regulation or voluntary disclosure of information. It is argued that stringent disclosure regulation results in better flow of information in politically connected companies and helps in curbing opportunistic behaviour. Practical implications - This research carries significant policy implications. It is proposed that in addition to mandatory disclosure requirements, the code of corporate governance should indicate desirable disclosure levels for voluntary corporate information as well. Originality/value - This is the first study to examine the effectiveness of role and usefulness of mandatory corporate disclosure regulation, voluntary disclosure practices, and capacity of regulators to enhance dissemination of corporate information in a developing country with high levels of political corruption and cronyism through an in-depth research.