Pak. J. Commer. Soc. Sci. 2012 Vol.

6 (2), 01-11

The Financial Performance and Corporate Governance Disclosure: A Study in the Annual eports of !isted Companies of "an#ladesh
Md. Abdur Rouf
Assistant Professor, Department of usiness Administration, !it" #ni$ersit", an%lades&

'-mail(roufbo%ra)"a&oo.*om+ roufna,ua)%mail.*om A$stract -&is resear*& aims to test empiri*all" t&e relations&ip bet.een t&e /inan*ial Performan*es (Profitabilit") and t&e le$el of !orporate 0o$ernan*e Dis*losure (!0D) b" t&e listed non-finan*ial *ompanies in an%lades&. Data are ta,en from annual reports of t&e listed *ompanies in t&e 2001. -&is paper is based on a sample of 23 listed *ompanies and #sed 456 as a met&od of estimation. -&e e7tent of *orporate %o$ernan*e dis*losure le$el is measured usin% 30 items of information and finan*ial performan*e (profitabilit") is measured b" return on assets (R4A). #sin% an un.ei%&ted approa*& for measurin% *orporate %o$ernan*e dis*losure, t&is approa*& is most appropriate .&en no importan*e is %i$en to an" spe*ifi* user-%roups. After establis&in% t&e dis*losure inde7, a s*orin% s&eet .as de$eloped to assess t&e e7tent of *orporate %o$ernan*e dis*losures. -&e result s&o.s t&at t&e le$el of !orporate 0o$ernan*e Dis*losure (!0D) is positi$el" *orrelated .it& t&e /inan*ial Performan*es (Profitabilit").-&e stud" pro$ides empiri*al e$iden*e to poli*" ma,ers and re%ulators in 6out& Asia. %ey&ords( Profitabilit", !orporate 0o$ernan*e Dis*losure, Return on Assets. '. (ntroduction !orporate dis*losure &as e7pe*ted an enormous a%reement of attention from man" resear*&ers (for e7ample, see Dula*&a, et al.2006+ 'n% and Ma,, 2008+ 9aniffa and !oo,e, 2002+ :arim, 1226). A firm;s profitabilit" is positi$el" asso*iated .it& its *orporate %o$ernan*e dis*losure le$el. 'l-0a<<ar and /ornaro, et al. (2008) ar%ue t&at &i%&er profitabilit" positi$e asso*iation .it& t&e $oluntar" dis*losure. =&" *orporations s&ould and do dis*lose information is e7pressed in $arious t&eories namel" sta,e&older t&eor", a%en*" t&eor", le%itima*" t&eor" and politi*al e*onom" t&eor". =&ile different t&eoreti*al perspe*ti$es ma,e different ar%uments, t&e" all a%ree t&at *ompanies release information mostl" for traditional user %roups su*& as s&are&olders, *reditors, finan*ial anal"sis and se*urit" *onsultants .&o find t&is information useful .&en ma,in% in$estment de*isions (9aniffa and !oo,e, 2002).-&e a%en*" t&eor" implies t&at *ompanies in*rease dis*losure in order to miti%ate *onfli*ts bet.een s&are&olders and mana%ers. >n addition, *ompanies .is&in% to en&an*e t&eir firm $alue ma" do so b" in*reased dis*losure (5obo and ?&ou, 2001).

/inan*ial Performan*e and !orporate 0o$ernan*e Dis*losure

:usuma.ati (2006) finds t&at profitabilit" affe*ts %ood *orporate %o$ernan*e $oluntar" dis*losure le$el ne%ati$el". >t implies t&at .&en *ompanies are fa*in% de*line in profitabilit", t&e" .ill tend to %i$e more dis*losure about *orporate %o$ernan*e pra*ti*es. @o si%nifi*ant asso*iation is found bet.een *orporate profitabilit" .it& a%%re%ate dis*losure le$el (A&med and Ao&n, 1222). (=atson et al., 2002+ =alla*e et al., 1223+ 9o and =on%, 2001+ 9ossain et al.2006) su%%ested t&e underl"in% reasons .&" lar%er firms dis*lose more information. -&e reasons proposed are t&at mana%ers of lar%er *ompanies are more li,el" to reali<e t&e possible benefits of better dis*losure and small *ompanies are more li,el" to feel t&at full dis*losure of information *ould endan%er t&eir *ompetiti$e position. -&e obBe*ti$es of t&e proposed stud" are( (i) -o measure t&e le$el of !orporate 0o$ernan*e Dis*losure information made b" t&e listed *ompanies in an%lades&. (ii) -o e7amine t&e asso*iation bet.een /inan*ial Performan*e (Profitabilit") and !orporate 0o$ernan*es Dis*losure le$els of listed *ompanies in an%lades&. ). A#ency Theory and Corporate Governance Disclosure A%en*" t&eor" models t&e relations&ip bet.een prin*ipal (o.ner) and a%ent (mana%er). Dula*&a, et al. (2006) !orporate %o$ernan*e dis*losure presents an e7*ellent opportunit" to appl" a%en*" t&eor", in t&e sense t&at mana%ers .&o &a$e better a**ess to a firm;s pri$ate information *an ma,e *redible and reliable *ommuni*ation to t&e mar,et to optimi<e t&e $alue of t&e firm. >n t&e real business .orld .&ere t&e mar,et is not perfe*tl"-effi*ient, t&e" belie$ed t&at mana%ers use finan*ial dis*losure poli*" to balan*e t&e de*isions t&e" ma,e and *ommuni*ate to t&e outside s&are&olders. -&is illustrates t&at information irre%ularit" problems influen*e t&e *orporate %o$ernan*e dis*losure poli*" of t&e *ompan". M*:innon and Dalimunt&e (1228) found fa$orable support t&at Australian di$ersified firms are more li,el" to $oluntaril" (!0) dis*lose se%ment information if t&e" &a$e minorit" interests in t&eir subsidiar" *ompanies. -&is result indi*ates t&at dis*losure of se%ment information pro$ides in*enti$es to ali%n t&e interests bet.een mana%ers and minorit" interests and is t&erefore li,el" to redu*e information irre%ularit" problems. -&erefore, as su%%ested b" a%en*" t&eor", *orporate %o$ernan*e dis*losure *ould ser$e as one of t&e monitorin% me*&anisms. *. !iterature evie& 3.1 Profitability Mana%ers are moti$ated to dis*losure more detailed information to support t&e *ontinuan*e of t&eir positions and remuneration and to si%nal institutional *onfiden*e. 'l0a<<ar and /ornaro (2008) ar%ue t&at &i%&er profitabilit" moti$ates mana%ement to pro$ide %reater information be*ause it in*reases in$estors; *onfiden*e, .&i*& in turn, in*reases mana%ement *ompensation. >t is also ar%ued (=alla*e and @aser, 122C+ Mee,, et al., 122C) t&at .ell performed *ompanies are e7pe*ted to dis*lose more information about t&eir performan*e. uBa,i and M*!onom" (2002) s&o. t&at firm fa*in% a slo.do.n in re$enues tends to in*rease t&eir dis*losure of *orporate %o$ernan*e pra*ti*es. Moreo$er, firms sufferin% serious *orporate %o$ernan*e failures tend to pro$ide e7tensi$e dis*losure of %o$ernan*e %uideline implemented in t&e period after su*& failures. 9aniffa and !oo,e (2002) find a positi$e and si%nifi*ant asso*iation bet.een t&e firm;s profitabilit" and t&e e7tent of $oluntar" dis*losure, .&i*& is *onsistent .it& t&e 2

Rouf

earlier (A&med and Ao&n, 1222+ :usuma.ati, 2006) find t&at profitabilit" affe*ts 0ood !orporate 0o$ernan*e $oluntar" dis*losure le$el ne%ati$el". >t implies t&at .&en *ompanies are fa*in% de*line in profitabilit", t&e" .ill tend to %i$e more dis*losure about *orporate %o$ernan*e pra*ti*es. 6in*e t&e studies supportin% positi$e relations&ip bet.een profitabilit" and dis*losure are *ondu*ted in finan*ial dis*losure field, t&e &"pot&esis of t&is stud" .ill be in t&e form of positi$e relations&ip. >n t&is stud", profitabilit" is measured b" return on assets ('4A)+ t&at is, net in*ome di$ided b" total assets. 3.2 Ownership Structure 4.ners&ip stru*ture is anot&er me*&anism t&at ali%ns t&e interest of s&are&olders and mana%ers ('n% and Ma,, 2008+ 9aniffa and !oo,e, 2002+ !&au and 0ra", 2002+ 9assain et al.,1223). -&e a%en*" t&eor" su%%ests t&at .&ere t&ere is a separation of o.ners&ip and *ontrol of a firm, t&e potential for a%en*" *osts arises be*ause of *onfli*ts of interest bet.een *ontra*tin% parties. >t is belie$ed t&at a%en*" problems .ill be &i%&er in t&e .idel" &eld *ompanies be*ause of t&e di$erse interests bet.een *ontra*tin% parties (Mo&d, et al.2006). " utili<in% dis*losure, mana%ers pro$ide more information to si%nal t&at t&e" .or, in t&e best interests of s&are&olders. M*:innon and Dalimunt&e (1228) s&o. t&at *ompanies .it& a sin%le o.ners&ip stru*ture dis*lose more $oluntar" information. 9ossain et al. (1223) su%%ested a ne%ati$e asso*iation bet.een mana%ement o.ners&ip stru*ture and t&e le$el of $oluntar" dis*losure b" Mala"sian listed firms. >n addition, 5a,&al (200C) propose t&at s&are mana%ement o.ners&ip is statisti*all" and ne%ati$el" asso*iated to $oluntar" earnin%s dis*losures. 4li$eira et al. (2006) also reported t&at firms .it& a lo.er s&are&older mana%ement $oluntaril" dis*lose more information. -&e si%nifi*ant role of mana%ement o.ners&ip in influen*in% $oluntar" dis*losures pra*ti*es of firms from t&e prior resear*&er. 6o it is e7pe*ted t&at o.ners&ip stru*ture .ill influen*e t&e *orporate %o$ernan*e dis*losure information. 3.3 Board Audit Committee 9o and =on% (2001) pro$ide t&at a positi$e asso*iation bet.een t&e presen*e of an audit *ommittee and *orporate dis*losure pra*ti*es. 6imilarl", M*Mullen (1226) reported t&at t&e presen*e of an audit *ommittee is asso*iated .it& reliable finan*ial reportin%, su*& as, redu*ed in*iden*e of errors, irre%ularities, and ot&er indi*ators of unreliable reportin%. >n addition, radbur" (1220) ar%ued t&at( Daudit *ommittees are *ommonl" $ie.ed as monitorin% me*&anisms t&at en&an*e t&e audit attestation fun*tion of e7ternal finan*ial reportin%E. -&e board usuall" dele%ates responsibilit" for t&e o$ersi%&t of finan*ial reportin% to t&e audit *ommittee to en&an*e t&e breadt& of rele$an*e and reliabilit" of annual report (=alla*e et al., 122C). -&us, audit *ommittees *an be a monitorin% me*&anism t&at impro$es t&e Fualit" of information flo. bet.een firm o.ners (s&are&olders and potential s&are&olders) and mana%ers, espe*iall" in t&e finan*ial reportin% en$ironment .&ere t&e t.o &a$e disparate information le$els. 0i$en t&e influen*e of audit *ommittees on t&e *onte7t and *ontent of *orporate annual reports, t&e follo.in% &"pot&esis is tested.

/inan*ial Performan*e and !orporate 0o$ernan*e Dis*losure

3.4 irm Si!e Most of t&ese studies found t&at si<e of firm does affe*t t&e le$el of dis*losure of *ompanies. ara,o et al. (2006)+ rammer and Pa$elin (2006) in$esti%ated t&at t&e lar%er t&e firm, t&e more li,el" t&e" .ill ma,e $oluntar" dis*losures. ased on t&e stud" done .orld.ide, for e7ample- =atson et al. (2002)+ =alla*e et al. (1223)+ 9o and =on% (2001)+ 9ossain et al. (2006) su%%ested t&e underl"in% reasons .&" lar%er firms dis*lose more information. -&e reasons proposed are t&at mana%ers of lar%er *ompanies are more li,el" to reali<e t&e possible benefits of better dis*losure and small *ompanies are more li,el" to feel t&at full dis*losure of information *ould endan%er t&eir *ompetiti$e position. -&us, t&e impa*t of firm si<e is e7pe*ted to be positi$el" asso*iated .it& t&e e7tent of so*ial responsibilit" dis*losures. >n t&is stud", sales turno$er and total assets .ill be used as t&e measures of *ompan" si<e. +. ,ypotheses -&e follo.in% spe*ifi* &"pot&eses &a$e been tested re%ardin% of t&e firm( "1# $he le%el of Corporate &o%ernance disclosures is positi%ely associated with the hi'her profitability of the firm. "2# $he le%el of corporate 'o%ernance disclosures is ne'ati%ely associated with a hi'her mana'ement. "3# $he le%el of corporate 'o%ernance disclosure is associated positi%ely for firms that ha%e an audit committee. "4# $he le%el of corporate 'o%ernance disclosures is positi%ely associated with the total assets of the firm. "(# $he le%el of corporate 'o%ernance disclosures is positi%ely associated with the sales turno%er of the firm. -. esearch Desi#n and .ethodolo#y (.1 )isclosure *nde+ Construction and Application >n t&e initial sta%e of t&is resear*&, *ompre&ensi$e list of items t&at ma" be *orporate %o$ernan*e dis*losed (!0D) b" *ompanies in t&eir annual reports .as identified. -&e list of dis*losure items in*luded bot& finan*ial and non-finan*ial items t&at ma" be rele$ant to in$estment de*ision-ma,in%, and t&at listed *ompanies ma" be dis*losed. 6in*e t&e fo*us of t&is resear*& is *orporate %o$ernan*e dis*losures (!0D), t&e preliminar" list of 60 items .as subBe*ted to a t&rou%& sele*tion to eliminate t&ose t&at are mandated. -&is list .as sent to $arious e7perts (professor, Professional !&artered a**ounted and !ost and Mana%ement a**ounted et*.) for sele*tion and as a result of t&eir feedba*,, t&e initial list of 60 items .as redu*ed to 30 items. -&e dis*losure items are *lassified into se$en *ate%ories( s&are&olders, board of *ommissionaires, board of dire*tors, audit s"stems, *orporate se*retar", sta,e&olders, and dis*losure information. (a list of t&e final 30 items is in*luded in Appendi7 -1)> emplo"ed an un.ei%&ted approa*& for t&e stud". -&is approa*& is most appropriate .&en no importan*e is %i$en to an" spe*ifi* user-%roups (:usuma.ati, 2006). After establis&in% t&e dis*losure inde7, a s*orin% s&eet .as de$eloped to assess t&e e7tent of *orporate %o$ernan*e dis*losures. >f a *ompan" dis*losed an item of information in*luded in t&e inde7, it re*ei$ed a s*ore of 1, and 0 if it is not dis*losed. 3

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(.2 Sample Selection and )ata Sources -&e sample data &a$e been *olle*ted from t&e D&a,a sto*, e7*&an%es seminar librar" for t&e period 2006-1. @inet" four listed non-finan*ial *ompanies from sto*, e7*&an%e &a$e been sele*ted on an a$ailable basis *o$erin% all se*tors. -&e data in t&e *urrent stud" about t&e finan*ial performan*e (profitabilit") and *orporate %o$ernan*e $ariables. -&e independent $ariables are profitabilit", o.ners&ip stru*ture, board audit *ommittee and firm si<e. -&e met&od of anal"sis is t&at of multiple re%ressions and t&e met&od of estimation is 4rdinar" 5east 6Fuares (456). (.3 ,e'ression -odel and $est of "ypothesis -&e statisti* met&od bein% used is multiple re%ression anal"sis. -&e re%ression eFuitation de$eloped empiri*all" tests t&e relations&ip bet.een t&e dependent $ariables of !orporate 0o$ernan*e dis*losure (!0D) and independent $ariables of finan*ial performan*e (Profitabilit"). >n addition to t&e finan*ial performan*e, a number of *ontrol $ariables are also in*luded in t&e model to test t&e &"pot&eses. -&e re%ression te*&niFue used to test 9 1 is as follo.s( -VD' i B,t G

HiB
t 1

@iB

=&ere, -!0D G -otal *orporate %o$ernan*e dis*losure s*ore for B t& firm at t&e time t, @i B G i t& item for B t& firm t G "ear -!0D G a I J1PR4A I J 2 P'4>I J 8 A!I J 3 -AI J C -6'I -&e $ariables t&at .ill be used in t&e anal"sis are as follo.s(Dependent /aria$les -!0D G -otal *orporate %o$ernan*e dis*losure s*ore re*ei$ed from ea*& *ompan" (ndependent /aria$les PR4A G Per*enta%e of Return on assets as net profit to total Assets. P'4> G Per*enta%e of eFuit" o.ned b" t&e insiders to all eFuit" of t&e firm. A! G oard Audit !ommittee, 1 for "es or 0 for @o -A -6' a G -otal assets of t&e firm. G -otal 6ales of t&e firm. G total *onstant, and G t&e error term

0. esults and Discussion ..1 ,esults of )escripti%e Statistics -able-1 presents des*ripti$e statisti*s for t&e sample firms. -&e results from t&e dis*losure inde7 indi*ate (-!0D) t&e &i%&est s*ore a*&ie$ed b" a firm is KCL and t&e lo.est s*ore is 22.C L .it& a standard de$iation of 16L. 6o t&e firms are .idel" distributed .it& re%ard to $oluntar" dis*losure. -&e mean of t&e Per*enta%e Return on C

/inan*ial Performan*e and !orporate 0o$ernan*e Dis*losure

eFuit" as net profit to total assets is 8.2KL .it& standard de$iation is 18.8KL.-&e mean of t&e per*enta%e of eFuit" o.ned b" t&e insiders to all eFuit" of t&e firm is 21.28 .it& standard de$iation is 12.11. -&e a$era%e board audit *ommittee ( A!) is 0.60+ standard de$iation is .32L .it& minimum and ma7imum si<es of 0 and 1 respe*ti$el". ..2 ,esults of Correlation Analysis -able-8 s&o.s t&e Pearson *orrelation amon% t&e $ariables. -&e result indi*ates t&at *orporate %o$ernan*e dis*losure (!0D) is positi$el" *orrelated .it& return on eFuit" at t&e 1L le$el of si%nifi*ant. 6imilar results appear for t&e board audit *ommittee. 4ne t&e ot&er &and !0D &as a ne%ati$e relations&ip .it& o.ners&ip stru*ture and si%nifi*ant le$el is 1L. 9o.e$er, R!0D &as a positi$e relations&ip .it& total assets and total sales but not si%nifi*ant. ..3 ,esults of -ultiple ,e'ression Analysis -able-3 s&o.s t&e results of t&e multiple re%ression anal"sis in m" stud". Re%ression &as been used in mu*& pre$ious resear*& e.%. A,&taruddin et al., 2002+ 9on%7ia and Ainian Mi,200K+ >bra&im et al, 2000+ 9o and =on%, 2001+ !&au and 0ra", 2002+ 9aniffa and !oo,e, 2002+ 'n% and Mar,, 2008.-&e table s&o.s t&e relations&ip bet.een t&e /inan*ial Performan*es (Profitabilit") and t&e le$el of !orporate 0o$ernan*e Dis*losure(!0D). -&e *oeffi*ient of determination R-sFuare, / ratio, beta *oeffi*ients and t-statisti*s for t&e re%ression model and summari<ed results of t&e dependent $ariable on t&e e7planator" $ariables *an be seen in t&e table-1. -&e results indi*ate an R-sFuare of 0.61C, and an / $alue of 2K.111, .&i*& is si%nifi*ant at t&e 0.000 le$els. ot& of t&ese $alues su%%est t&at a si%nifi*ant per*enta%e of t&e $ariation in *orporate %o$ernan*e dis*losure (!0D) *an be e7plained b" t&e $ariations in t&e .&ole set of independent $ariables. >f t&e independent $ariable PR4A is one unit in*reased t&en t&is situation t&e dependent $ariable is in*reased 0.21K .it& 6' G 0.0K3, ata t $alue G 8.262 and si%nifi*an*e at t&e 0.000. -&e result su%%ests t&at firms &a$e a &i%&er per*enta%e of profit abilit" is positi$el" asso*iates .it& *orporate %o$ernan*e dis*losure. -&is result is similar to t&at of 'l-0a<<ar and /ornaro (2008)+ =alla*e and @aser (122C)+ Mee, et al.(22C)+ 9aniffa and !oo,e (2002). =it& re%ard to *ontrol $ariables, m" stud" su%%ests t&at are o.ners&ip stru*ture of t&e firm in respe*t to per*enta%e of eFuit" o.ned b" t&e insiders to all eFuit" of t&e firm (P $alueN0.01) tend to &a$e ne%ati$el" *orporate %o$ernan*e dis*losures .it& t&e *oeffi*ient of -0.286 si%nifi*ant at t&e 0.002 le$el. -&is is similarl" .it& M*:innon and Dalimunt&e (1228)+ 9ossain et al.(1223) + 5a,&al (200C)+ 4li$eira et al. (2006). -&e board audit *ommittee is positi$el" asso*iated .it& *orporate %o$ernan*e dis*losure pra*ti*es. >t is t&e important &"pot&esis of t&e e7tent of !0D, .it& t&e *oeffi*ient of 0.CC2 si%nifi*ant at t&e 0.000 le$el. -&is result is similar to t&at of 9o and =on% (2001). =it& re%ard to *ontrol $ariables, t&is stud" su%%ests t&at firms t&at are lar%er in si<e in respe*t to total sales (P $alueN0.1) tend to &a$e positi$el" $oluntar" dis*losures. -&is result similar .it& =atson et al., 2002+ =alla*e et al., 1223+ 9o and =on%, 2001+ 9ossain, et al.2006. -&e re%ression results for firm si<e b" total assets are insi%nifi*ant. -&e result is *onsistent .it& 9aniffa and !oo,e (2002).

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-able 1( Des*ripti$e 6tatisti*s for all Variables /aria$les -!0D PR4A P'4> A! -A -6' .ean 3K.KK 8.2K 21.28C 0.60 26K81.CC 1K22K.1K .edian 31.C0 2.63 12.CK 1.00 C026.80 3K30.22 .inimum 22.C0 -13.01 .001 0 C6.2C 0 .a1imum KC.00 12.11 6C.22 1.00 81K0C6.C0 331016.11 Std. Deviation 16.02 18.8K 12.11 .32 66031.K3 CK3CC.K1

-able 2( !orporate 0o$ernan*e Dis*losure 6*ore Disclosure Score 234 NG80 81-30 31-C0 C1-60 61-10 11-K0 K1-20 O20 5o. of Companies 2567+4 12 (12.KL) 2C (26.CL) 11 (1KL) 28 (23.1L) 11 (11.1L) C (C.2L) 1 (1.1L) 0 (0L)

-&e table s&o.s t&e number and per*enta%es of *ompanies .&ose dis*losure s*ore is .it&in t&e spe*ified ran%e. -able 8: Pearson !orrelation anal"sis results (@G23) /aria$le TCGD P 89 P98( "AC TA TS9 s -!0D 1.00 PR4A 0.3K0(PP) 1.00 P'4> -0.0826(PP) -0.123 1.00 A! 0.621(PP) 0.2K1(PP) -0.2K6(PP) 1.00 -A 0.13K 0.026 -0.2K8(PP) 0.202 1.00 -6' 0.133 0.102 -0.001 0.066 0.CK0(PP) 1.00 PP !orrelation is si%nifi*ant at t&e 0.01 le$el (2-tailed). -!0D G -otal *orporate %o$ernan*e dis*losure s*ore re*ei$ed from ea*& *ompan"+ PR4' GPer*enta%e of Return on assets as net profit to total Assets+ P'4> GPer*enta%e of eFuit" o.ned b" t&e insiders to all eFuit" of t&e firm+ A! G oard Audit !ommittee, 1 for "es or 0 for @o+ -A G -otal assets of t&e firm+ -6' G -otal 6ales of t&e firm.

/inan*ial Performan*e and !orporate 0o$ernan*e Dis*losure

-able 3: Multiple Re%ression Anal"sis (@G23) /aria$les "eta Coefficient Standard 9rror "eta t /alues Si#nificance PR4A .21K .0K3 8.262 .000PPP P'4> -.286 .0C2 -8.23C .002PPP A! .CC2 2.861 1.120 .000PPP -A -.128 .000 -1.30K .168 -6' .131 .000 1.1C0 .0K3P P PN0.1, t.o tailed, PPP PN0.01, t.o-tailed -!0D G -otal *orporate %o$ernan*e dis*losure s*ore re*ei$ed from ea*& *ompan"+ PR4A GPer*enta%e of Return on assets as net profit to total Assets+ P'4> GPer*enta%e of eFuit" o.ned b" t&e insiders to all eFuit" of t&e firm+ A! G oard Audit !ommittee, 1 for "es or 0 for @o+ -A G -otal assets of t&e firm+ -6' G -otal 6ales of t&e firm. R sFuire G.61C + AdBusted R sFuire G .C23 +/ Value G2K.111 +/ si%nifi*an*e G.000 Durbin =atson test G1.683 -able C: 6ummar" of t&e Re%ression results /aria$les !a$els -!0D J1PR4A J2P'4> J8 A! J3-A JC-6' 91pected Si#n >nde7 (I) (-) (I) (-) (I) esults >nde7 6upported 6upported 6upported @ot 6upported 6upported

:. Conclusions and (mplication for Further Study -&is resear*& is an e7tension of pre$ious resear*& .&ere a set of finan*ial performan*e (profitabilit") $ariables is *onsidered to e7amine t&eir asso*iation .it& t&e le$el of *orporate %o$ernan*e dis*losure (!0D). -&e obBe*ti$e of t&is stud" .as to e7amine finan*ial performan*e (profitabilit" influen*e on *orporate %o$ernan*e dis*losure. >n t&is stud" used t&e dis*losure inde7 to measure *orporate %o$ernan*e dis*losure on a sample of 23 listed *ompanies of an%lades&. -&e first &"pot&esis of t&e stud" .as a &i%&er profitabilit" of t&e firm is positi$el" *orrelated to t&e le$el of *orporate %o$ernan*e dis*losure (!0D). Also findin% m" result is positi$el" related to profitabilit" of t&e firm. -&is result is similar to t&at of 'l-0a<<ar and /ornaro (2008)+ =alla*e and @aser (122C)+ Mee, et al. (22C)+ 9aniffa and !oo,e (2002). -&ere are number of limitations of t&is stud" as .ell. /irst limitation of t&e stud" is used onl" non-finan*ial *ompanies as a sample. 6o, t&e results ma" not e7tend a*ross all *ompanies in an%lades&. 6e*ond, t&e resear*&ers; *onstru*ted dis*losure inde7 .&i*& &as been used in t&e stud". -&e inde7 is $er" sensiti$e and *an affe*t t&e results if t&e sele*ted items of information improperl". -&ird, t&e stud" *onsiders onl" one "ear of data. -&e results ma" differ a*ross different "ears if multiple "ears are *onsidered for anal"sis. /inall", t&e stud" in$esti%ates t&e e7tent of *orporate %o$ernan*e dis*losure K

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lea$in% t&e ot&er fa*et of dis*losure i.e., mandator" dis*losure. -&e results of t&e stud" s&ould be interpreted .it& t&ese limitations in mind. /uture resear*& on *orporate %o$ernan*e dis*losure s&ould see, to ta,e into a**ount all listed *ompanies under non-finan*ial %roup. Additionall", studdin% t&e same resear*& issues found &ere but in a different industr" se*tor .ould be an interestin% e7tension of t&is stud". -&is ma" dis*lose interestin% results in terms of $ariations .it&in t&e industrial se*tors. 9F9 95C9S A&med, :. and !ourtis, A.:. (1222). Asso*iations bet.een !orporate !&ara*teristi*s and Dis*losure 5e$els in Annual Reports( A Meta-Anal"sis. British Accountin' ,e%iew; 81, 8CQ61. A,taruddin, M., 9ossain, M. A., 9ossain, M. and Rao 5ee (2002). !orporate 0o$ernan*e and Voluntar" Dis*losure in !orporate Annual Reports of Mala"sian 5isted /irms. $he /ournal of Applied -ana'ement Accountin' ,esearch, 1(1), 1-12. ara,o, D.0., 9an*o*,, P. and ><an, 9. R. (2006). /a*tors influen*in% $oluntar" *orporate dis*losure b" :en"an *ompanies. Corporate &o%ernance0 An *nternational ,e%iew, 13(2), 101-12C. radbur", M.'. (1220). -&e in*enti$es for $oluntar" audit *ommittee formation. /ournal of Accountin' and Public Policy, 2, 12-86. uBa,i, M. and M*!onom", .A. (2002). !orporate %o$ernan*e( /a*tors >nfluen*in% Voluntar" Dis*losure b" Publi*l" -raded !anadian /irms. Canadian Accountin' Perspecti%es, 1, 10C-182. !&au, 0.:. and 0ra", 6.A. (2002). 4.ners&ip stru*ture and *orporate $oluntar" dis*losure in 9on% :on% and 6in%apore. $he *nternational /ournal of Accountin', 81(2), 231-263. Dula*&a, 0. ., P&il, 9. and ><an, 9.R. (2006). Relations&ip bet.een !orporate 0o$ernan*e attributes and Voluntar" Dis*losure in Annual Reports( -&e :en"an '7perien*e. inancial ,eportin'0 ,e'ulation and &o%ernance0 C(1). 'l-0a<<ar, 6.M. and /ornaro A.M. (2008). An 'mpiri*al >n$esti%ation of !orporate Voluntar" Dis*losure of Mana%ement;s Responsibilities for /inan*ial Reportin%. 5ubin 6*&ool of usiness /a*ult" S=or,in% PapersT, Pa*e #ni$ersit". 'n%, 5.5. and Ma,, R.-. (2008). !orporate %o$ernan*e and $oluntar" dis*losure. /ournal of accountin' and Public Policy, 22(3), 82C-83C. 0&a<ali, [email protected]. and =eetman, P. (2006). Perpetuatin% traditional influen*es( Voluntar" dis*losure in Mala"sia follo.in% t&e e*onomi*s *risis. /ournal of *nternational Accountin'0 Auditin' and $a+ation, 1C(2), 226-23K. 9aniffa, R.M. and !oo,e, -.'. (2002). !ulture, *orporate %o$ernan*e and dis*losure in Mala"sian *orporations, ABAC1S, 8K(8), 811-8C0.

/inan*ial Performan*e and !orporate 0o$ernan*e Dis*losure

9o, 6.6.M. and =on%, :.6. (2001). A stud" of *orporate dis*losure pra*ti*es and effe*ti$eness in 9on% :on%. /ournal of *nternational inancial -ana'ement and Accountin', 12(1), 1C-101. 9on%7ia 5i and Ainian Mi (200K). >mpa*t of !orporate 0o$ernan*e on Voluntar" Dis*losure in !&iness 5isted !ompanies. Corporate Ownership and control2, C(2), 860866. 9ossain, M., >slam, :. and Andre., A. (2006). !orporate 6o*ial and en$ironmental dis*losure in de$elopin% *ountries( e$iden*e from an%lades&. -&e Asian pa*ifi* *onferen*e on >nternational A**ountin% >ssues, 9a.aii, 4*tober-2006. 9ossain, M., -an, 5. M. and Adams, M. (1223). Voluntar" dis*losure in an emer%in% *apital mar,et( 6ome empiri*al e$iden*e from *ompanies listed on t&e :uala 5umpur 6to*, '7*&an%e. *nternational /ournal of Accountin', 22, 883-8C1. >bra&im, D.@, 9aron, 9. and Ariffin (2000). Voluntar" dis*losure items( A note on >ndonesia. $he -alaysian Accountant0 4*tober, 12-12. :arim, A.:.M.=. (1226). -&e asso*iation bet.een *orporate attributes and t&e e7tent of *orporate dis*losure. /ournal of Business Studies0 1ni%ersity of )ha3a, 11(2), K2-123. :usuma.ati, D.@. (2006). Profitabilit" and !orporate 0o$ernan*e Dis*losure( An >ndoneian 6tud", 6imposium @asional A,untansi 2 Pada&%, 28-26 A%ustus, :->@--13, pp-1-12. 5a,&al, /. (200C). Voluntar" earnin%s dis*losures and *orporate %o$ernan*e( '$iden*e from /ran*e. ,e%iew of Accountin' and inance, 3(8), 63-KC. 5obo, 0.A. and ?&ou, A. (2001). Dis*losure Fuantit" and earnin% mana%ement. paper presented at t&e 2001 Asia pa*ifi* Aournal of a**ountin% and e*onomi*s 6"mposium in 9on% :on%. M*:innon, A. 5. and Dalimunt&e, 5. (1228). Voluntar" dis*losure of se%ment information b" Australian di$ersified *ompanies. Accountin' and inance, 88(1)( 88-C0. M*Mullen, D.A. (1226). Audit *ommittee performan*e( An in$esti%ation of t&e *onseFuen*es asso*iated .it& audit *ommittee. Auditin'# A /ournal of Practice and $heory, 1C, K1-108. Mee,, 0., Roberts, !. . and 0ra", 6.A. (122C). /a*tors influen*in% $oluntar" annual report dis*losures b" #.6., #.:. and *ontinental 'uropean Multinational *orporations. /ournal of *nternational Business Studies, (-&ird Muarter); CCC-C12. 4li$eira, 5., Rodri%ues, 5.5. and !rai%, R. (2006). /irm-spe*ifi* determinants of intan%ibles reportin%( '$iden*e from t&e Portu%uese sto*, mar,et. /ournal of "uman ,esource Costin' and Accountin', 10(1), 11-88. =alla*e, R.6.4. and @aser, :. (122C). /irm-spe*ifi* determinants of t&e *ompre&ensi$eness of mandator" dis*losure in t&e *orporate annual reports of firms listed on t&e sto*, e7*&an%es of 9on% :on%. /ournal of Accountin' and Public policy, 13(2), 811-86K. =alla*e, R.6.4., @aser, :. and Mora, A. (1223). -&e relations&ip bet.een t&e *ompre&ensi$eness of *orporate annual reports and firm spe*ifi* *&ara*teristi*s in 6pain. Accountin' and Business ,esearch, 2C(21), 31-C8. 10

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=atson, A., 6&ri$es, P. and Marston, !. (2002). Voluntar" dis*losure of a**ountin% ratios in t&e #:. British Accountin' ,e%iew, 83(3), 2K2-818. Appendi1: ' Good Corporate Governance Disclosure Check !ist in Annual eports of "an#ladesh
A. Shareholders 1. 6&are&older Ri%&ts 2. 0eneral Meetin%s of 6&are&olders 8. 'Fuitable -reatment of 6&are&olders 3. 6&are&olders A**ountabilit" C. Appointment and Remuneration 6"stem of t&e oard ". "oard of Commissionaires 6. !ommissionaires /un*tions 1. !ommissionaires !omposition K. !omplian*e to Arti*les of Asso*iation (AoA) and 5a. 2. Meetin%s of !ommissionaires 10. >nformation for !ommissionaires 11.4t&er usiness Relations&ip bet.een !ommissionaires or Dire*tors and t&e *ompan" 12. /orbidden of -a,in% Personal 0ain 18.Appointment, Remuneration and Performan*e '$aluation of non-Dire*tors '7e*uti$es 13. !ommittee 'stablis&ed b" !ommissionaires C. "oard of Directors 1C. Dire*tors Roles 16. Dire*tors !omposition 11. !omplian*e to AoA and 5a. 1K. /orbidden of -a,in% Personal 0ain 12. Dire*tors Meetin% 20. >nternal !ontrols 21. Dire*tors Roles in A**ountin% 22. Re%isters D. Audit Systems 28. '7ternal auditor 23. Audit !ommittee 2C. >nformation 26. !onfidentialit" 21. Audit Re%ulations 9. Corporate Secretary 2K. !orporate 6e*retar" /un*tions 22. Mualifi*ations 80. A**ountabilit" 81. !orporate 6e*retar" Role in Dis*losure F. Stakeholders 82. 6ta,e&olders Ri%&ts 88. 6ta,e&olders Parti*ipation in Mana%ement Monitorin% G. Disclosure 83. -imel" and A**urate Dis*losure 8C. Matters of Material >mportan*e to De*ision Ma,in% 86. !omplian*e Dis*losure to t&e !odes 81. Dis*losure of Pri*e 6ensiti$e >nformation 8K. Donation 82. !omplian*e to 9ealt& Prote*tion, =or,in% 6afet" and 'n$ironmental 5a. 30. 'Fuitable =or,in% 4pportunit"

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