Factors determining voluntary disclosure level of publicly traded companies in Brazil

Abstract

The objective of the study is to identify the factors explaining voluntary disclosure level of publicly traded companies in Brazil. The research is based on Verrecchia's Voluntary Disclosure Theory (2001). Companies' disclosure level was defined from metrics composed of six categories and 43 subcategories: Business Environment (8), Operational Activity (8), Strategic Aspects (8), Financial Information (7), Financial Indexes (4) and Corporate Governance (8). The analysis of voluntary disclosure was performed based on the Standard Financial Statements from the fiscal year which ended in 2007, through content analysis technique. The sample is composed of the 100 largest non-financial publicly traded companies. Using a multiple regression model, nine hypotheses were tested: audit, profitability, internacionalization, size, corporate governance, indebtedness, share control, stock issue and industry. Results show that larger electric power companies with American Depositary Receipts (ADRs) at levels II and III in the New York Stock Exchange (NYSE), which adopt different levels of Sao Paulo Exchange's (Bovespa) corporate governance, present, on average, a higher level of voluntary disclosure. These results can be interpreted in the light of bonding hypothesis and also political costs hypothesis, as larger companies and those with best practices regarding corporate governance show higher levels of voluntary disclosure. It is also possible to note that sector regulation, especially in the electric power sector, is also a significant factor to explain the level of voluntary disclosure of publicly traded companies.