Author(s): Alex Kwame Abasi, Emmanuel Kojo Oseifuah, Freddy Ntungufhadzeni Munzhelele
The purpose of this paper is to formulate a weighted disclosure index which can be used by accounting researchers and practitioners to evaluate the level of a firm`s compliance to IAS and IFRS. This newly formulated method is then applied to study listed firm on the Johannesburg Stock Exchange (JSE). Presently, there is no existing weighted method for evaluating accounting weighted disclosure index. The existing ones are unweighted disclosure index and partially unweighted disclosure index. Therefore, applying the scale scoring and dummy scoring techniques, and portfolio weight method, the authors formulate two novel weighted disclosure methods (WDIscales) and WDIdummy) that can be used to evaluate firms` accounting disclosure level using information disclosed in their annual reports, financial statements and on their websites as well as on their regulator`s website. The results of the study show that the average score for website reporting is an impressive 80.1%, indicating that JSE listed firms disclose substantial information on their websites as well as on the website of the JSE. However, the average score for WDIscale is 26% with a maximum score of 52%. When measured using WDIdummy the average score increases to 40% with maximum score increasing to 75%. This imply that even though substantial information is disclosed on their website, content analysis of financial accounting information disclosed, on average is between 26% (WDIscale) and 40%(WDIdummy). Consistent with WDI, the average score using PUDI increases marginally to 43.3% with maximum score of 69%. However, the average score is astronomically 173% with a maximum score of 276% when measured using UDI. Hence, the results show that UDI is an outlier which excessively over estimate disclosure results. Therefore, WDIscale, WDIdummy, and PUDI are consistent methods for measuring corporate accounting disclosures. The multivariate regression finds that an increase in website reporting leads to a reduction in the possibility of a firm experiencing financial distress, thus an increase in WDIscale score leads to 12% increase in a firm`s liquidity. Finally, the regression results show that an increase in a firm`s PUDI score leads to an increase in its liquidity, however, the increment is a minimal 4.83%. This study is the first to formulate a weighted disclosure method for evaluating corporate accounting disclosures by firms in their annual reports, financial statements and on their websites as well as on the website of their regulator. The implication to stakeholders is that, to achieve accurate results, policy makers, investors and managers should adopt WDIscale, WDIdummy, and PUDI.