Aggregate financial disclosure practice: evidence from the emerging capital market of Kuwait

Purpose - The purpose of this paper is to evaluate the mandatory and voluntary disclosure practice and its determinants in Kuwait, an emerging market that applies International Financial Reporting Standards (IFRS). Design/methodology/approach - The study employs two main methods: an index-based analysis of mandatory, voluntary and aggregate disclosure as well as univariate and multivariate regression analysis of the determinants of disclosure levels. Findings - The results show that the average aggregate disclosure level is 44 per cent. None of the sample companies complied fully with the disclosure requirements of IAS/IFRS. The extent of voluntary disclosure is also relatively low, although the documented amount represents an increase on that revealed in earlier studies in Kuwait. The multivariate regression results reveal that firm size is positively associated with voluntary disclosure, while mandatory disclosure is negatively linked to profit. Research limitations/implications - The findings are based on evidence from a single country and further work is needed to ascertain the extent of generalisability. Practical implications - The results of the study have implications for policy makers, professional accounting bodies and regulators as they contribute to the debate on to develop and encourage both compliance with mandatory disclosure requirements and voluntary practice. The evidence also has implications for attempts to derive full understanding of the factors driving disclosure practices in the developing world, and how these differ from behaviour in the world’s richest nations. Originality/value - The study contributes to the existing literature in the area in two main ways. First, as compliance with mandatory disclosure requirements in developed countries is total (or near to total) in most cases, it has been the subject of little empirical enquiry. By focussing instead on a developing nation – one that has adopted IFRS – the analysis facilitates the provision of novel evidence regarding both the nature and determinants of failure to follow disclosure rules. Second, prior studies generally fail to distinguish between financial and non-financial firms, despite differences in reporting standards and norms across the two groups; the present study makes this distinction.