Author(s): W.A.N. Priyadarshanie, Siti Khalidah Binti Md Yusoff, S. M. Ferdous Azam
Purpose: This paper aims to develop a conceptual framework based on the most commonly used theories in corporate disclosure literature to explain firms’ motives for disclosure decisions. Design / methodology/ approach: System-oriented theories namely, institutional theory, stakeholder theory and institutional theory are integrated into one model to explain the determinants of corporate disclosures. Thereby, variables were identified under each theory and indicators which can be used as the proxy for the variables were also recognized. Findings: Disclosure literature confirms that political economy theory is the most commonly used theory in explaining determinants of corporate disclosure level. Accordingly, Profitability, company age, firm size and media exposure can be used as the measures of corporate legitimacy. Shareholder power, creditor power and lobby group power were taken as the variables of stakeholder theory. Isomorphism which is the practice of adopting similar practices is considered under the institutional theory. Coercive isomorphism, mimetic isomorphism, and normative isomorphism are three separate isomorphic processes and indicators were recognized for each isomorphism. Research limitations/ implications: The main limitation of this study is that this conceptual framework has included only the political economy theory. Other important theories such as agency theory, signaling theory, resource dependency theory, media agenda-setting theory may be used to explain corporate disclosure practices. Practical implications: This conceptual framework can be employed in empirical studies on the motivations for corporate disclosure behaviors in a variety of settings. The predicted disclosure motivates can be compared to empirical evidence of those studies. Findings obtained by utilizing this conceptual framework will help to evaluate which companies report? Under which context, in which sectors and of which size? And it answered whether there is uniform reporting across industries. Those findings will help regulators to establish a code of practice for disclosing information which leads to a better practice of reporting. Originality / Value: This paper has presented a conceptual model for determinants of corporate disclosures which is not discussed elsewhere in the literature.