Measurement and Analysis of Disclosure Level: The Case of Bangladesh
Important i.e., Should be disclosed and item is very important
5. = Very important i.e., it is essential to disclose this item
Here, a respondent ticked in the 5 point box i.e., this item of disclosure is essential to disclose as perceived by the respondent. Thus, after completing the survey researcher analyse the result of survey by using statistical tools i.e. mean score for each item of disclosure. If the mean score is three or more, the item is included in the final disclosure checklist against which the annual reports are examined to establish the extent of disclosure by the sample companies.
Step – 3
Disclosure score of the sample companies is developed on the basis of final disclosure checklist. In this case, dichotomous procedure is followed. According to this approach, if an item appear in the annual reports score ‘1’ and ‘0′ for non appearance of the item in annual reports. Thus, total disclosure score is prepare for sample companies.
Step-4
Disclosure Index is an index which is developed on the basis of disclosure score calculated above. Dichotomous approach and PC approach are usually used to calculate the disclosure index. This index can be weighted or unweighted. Under weighted approach, every item of disclosure carries some value or weight which is assigned by the researcher. On the other hand, all item of disclosure considers equally important under unweighted approach. Most of the researcher used unweighted approach in developing disclosure index in their study to establish an unbiased research.
Dichotomous Unweighted Approach
∑dmi
i = 1
i = 1
=
∑dni
ODI
Where, d = 1 if a disclosable item is disclosed, 0 if that item is not disclosed;
m = number of item disclosed
n = maximum number of disclosure items possible
Partial Compliance Unweighted Approach
PCj
=
∑Xi
Rj
Where PCj = Total compliance score for each company and 0 ≤ PCj ≤ 1.
Xi = the level of compliance with each section of disclosure requirements.
i = 1
Rj = total number of relevant / applicable disclosure section for each company j
This means that, initially, using the ‘dichotomous’ approach, the researcher calculates the compliance with each section of disclosure separately. Subsequently, the sum of these compliance scores (X) is divided by the total number of relevant / applicable disclosure section for each company j i.e., Rj.
Step –
Different Statistical Tools and Technique
Usually, Mean or Average, Standard Deviation and Co-efficient of variation are used in
the current study for measuring, comparing and evaluating the performance of disclosure level of either each section of disclosure or as a whole of sample companies.
Result and Discussion on the current study
Draft and final disclosure checklist:
Summary of Draft and Final Disclosure Checklist
Parts
Total Items (Draft)
Items accepted (Final)
Percentage of items accepted
Number
%
Number
%
General Disclosure
25
11
20
10
80
Company Profile Disclosure
25
11
15
8
60
Directors Report Disclosure
30
14
28
14
93
Financial Highlight Disclosure
30
14
27
14
90
Accounting Polices Disclosure
26
12
26
13
100
Income Statement
14
6
14
7
100
Balance Sheet
48
22
48
24
100
Cash Flow Statement
22
10
22
11
100
Overall