THE DIRECTIONS OF CAUSALITY BETWEEN THE VOLUNTARY DISCLOSURE AND COMP

Amer Alhazaimeh, Ravindran Palaniappan, Mahmoud Almsafir

Abstract


Over the last two decades, there has been globally much attention towards voluntary disclosure  initiatives arising mainly due to unrelenting needs expressed by various stakeholders to be more informed of corporations. Mandatory corporate disclosure alone seems inadequate. Therefore, the study aims to evaluate the causality directions between the extent of voluntary disclosure and corporate performance amongst listed Jordanian companies at Amman Stock Exchange (ASE) for the period 2002-2011. The measurement of voluntary disclosure is based on the checklist which was selection from previous studies then refined the checklist to ensure its validity from experienced Jordanian accountants from Amman Stock Exchange (ASE). Additionally, using Granger tests in studying causality between voluntary disclosures and corporate performance, empirical results indicate that there are 26 companies having unidirectional causality, 45 companies having no directional causality and one company having bidirectional causality. This study argued that the quality of voluntary disclosure is also highly correlated with firm performance. Hence, high degree of transparency and quality of disclosure should enable sound governance and improve firm performance. Otherwise, low voluntary disclosure increases the market’s difficulty in predicting firm performance.


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References


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