The impact of Corporate

disclosures on firm’s
value and stock liquidity
in the emerging market of
Egypt.

Under supervision of:

Prof. Dr: Racha Elmoslemany
Dr. Sara Yasser.

MADE BY:
DINA AHMED FAWZY ALFAWAL
REGISTRATION NUMBER: 17100450
Introduction:
Disclosure is an integral part of financial reporting which is one of the main ways businesses
communicate with their stakeholders (Alfraih,2017; Gunawan and Lina,2015). Disclosures in
the firms’ annual reports are grouped into two parts: the mandatory and the voluntary
disclosure. The former is the disclosure required by law and obliges the company to
communicate information about its current cash flows, profits, net assets and ownership
claims etc. In this case the firm can be penalized if it doesn’t fully comply with mandatory
disclosure requirements. The latter is according to the free choice of management and is
aimed to provide more information beyond the traditional accounting information to the users
of the annual reports to decrease the information asymmetry and support the decision-making
process (Gunawan and Lina,2015; Tsalavoutas and Dioysion,2014).

Due to the financial scandals which took place in the recent decades that lead to the collapse
of many companies, investors have lost faith in the reliability of the financial figures
presented by the firms. Thus, stakeholders’ needs for corporate information have changed
consequently. Nowadays, stakeholders demand higher levels of disclosure. The demand for
more corporate information has made compliance with minimum levels of mandatory
disclosure not sufficient. Consequently, companies nowadays tend to exceed the mandatory
disclosure requirements and disclose additional information known as voluntary disclosure
(Elfeky, 2017). Not only the financial scandals have increased the importance of voluntary
disclosure, but also the huge decisive influence that information has gained in the current age,
the advancement of communication tools and the corporate governance practices (Uyar and
Kiliç,2012). All these trends have eventually made voluntary disclosure a rapidly growing
area of research in the accounting field

Prior studies including Elfeky (2017), Samaha, Dahawy, Hussainey and Stapleton (2012), A.
Bokpin (2013), Matusiewicz and Jaworska (2015) have concentrated on examining the extent
of financial disclosure by corporations in many countries and evaluated the determinants of
financial disclosure and the firm’s characteristics which have an effect on the disclosure
levels. However, there is one issue that has not been given sufficient attention in previous
studies; namely the relationship between corporate disclosures and firm value and stock
liquidity (economic consequences of corporate disclosures) in general and for emerging
markets in particular (Hassan, Romilly, Giorgioni and Power, 2009; Uyar and Kiliç,2012).
Results of prior research in the area of the economic consequences of disclosure have been
contradicting. Wagenhofer (2004) proposes that disclosure levels and firm’s value are
negatively related depending on the assumptions made upon the factors that affects the
consequences of disclosure which are: uncertainty, multi-person settings with conflicts of
interest, and information asymmetry. The more public information accessible, the less private
information collected by market participants, which decreases the overall amount of
information available on the capital market. Furthermore, additional public information might
have negative effects if this information places the firm at a competitive disadvantage relative
to its competitors (Hassan et al.,2009).

On the other hand, some studies showed that disclosure levels and firm’s value are positively
related as increased levels of disclosures imply more transparent financial statements and that
greater transparency of information reduces risk about company fundamentals and reduces
the risk about the future cash flows of the company and hence increases the firm’s value
(Tsalavoutas and Dionysiou, 2014). Uyar and Kiliç (2012) also proposed that voluntary
disclosures can help reduce the information gap, improve the credibility of financial reporting

2
contribute to understanding the role of accounting information in firm valuation and
corporate finance. The contradicting findings strengthens the opinion that there is a dynamic
interplay of different factors determining the relationship between disclosure and firm value
that differs according to firm’s size, degree of financial leverage and other control variables
that affect the relationship (Hassan et al., 2009).

The low mandatory disclosure regime and the weak legal enforcement in Egypt makes the
country a rich setting for this study, as larger cross-sectional variations in terms of disclosure
levels and a wider range of outcomes will be found, which allows the author to investigate
lower levels of disclosures that are not frequently seen in highly developed countries. This
gives the study a special value, since the findings may be applicable to several markets
sharing similar characteristics with Egypt (Khlif, Samaha and Soliman, 2019). In addition,
Egypt is an emerging economy with a large foreign investment potential, therefore Egyptian
companies must increase their disclosure levels in order to appeal to foreign investors
(Bokpin, Isshaq and Nyarko, 2015), this makes Egypt an interesting setting for this study
whose main aim is to drag the regulators’ and managers’ attention in Egypt to the importance
of financial disclosure and transparency.

This study is aimed to fill some gaps identified in the current literature of the relationship
between disclosure and firm’s value. Firstly, most research conducted in this area is devoted
to developed capital markets with strong regulatory environment and corporate governance
practices, limited literature is found addressing this area in emerging markets characterized
by weak regulatory environment and low disclosure levels (Uyar and Kiliç,2012). Thus, this
study is aimed to expand the literature by conducting this research in the emerging market of
Egypt. Secondly, the majority of previous research tackling this area has focused on the
impact of voluntary disclosure only assuming that mandatory disclosure requirements are met
by all the companies in developed countries, therefore, the mandatory disclosure levels are
the same. However, this is not the case in Egypt due to the weak legal enforcement. Thus,
this study examines the effect of both mandatory and voluntary levels of disclosures as not all
the companies comply with the mandatory disclosure requirements in Egypt (Hassan et al.,
2009). Another gap to be filled in this study is that most previous studies have focused on the
level of financial disclosure, Thus, this paper will be the first to examine the effect of both the
level and the time of financial disclosure on the firm’s value, timely disclosure is proxied
using the earnings announcement lag (Khlif, Samaha and Azzam, 2015).
The primary objective of this study is to examine the impact of financial disclosure on the
firm’s value and the stock liquidity in Egypt especially in the post-reform period that has
occurred regarding corporate governance practices, disclosure and transparency to find out
whether those reforms have increased the value of corporate disclosures made by Egyptian
companies and whether those reforms led to an increase in the firm value and stock liquidity
of the Egyptian companies. The last study conducted in this area was conducted by (Hassan
et al.) in 2009 and the sample was from 1997 to 2002, so no previous research has been
conducted after this period. Thus, the study is aimed to cover this gap and take into
consideration the post-reform period.

Research questions: RQ1: Does the level of mandatory disclosures affect the firm’s
value and stock liquidity of the listed Egyptian companies?

RQ2: Does the level of voluntary disclosures affect the firm’s value and stock liquidity of
the listed Egyptian companies?

3
RQ3: Do timely disclosures affect the firm’s value and stock liquidity of the listed Egyptian
companies?

Theoretical framework:
One of the theories used to explain the impact of corporate disclosure on firm’s value and
stock liquidity is the agency theory. The agency theory suggests that there is an agency
problem which arise from the agency relationship, where the principals (shareholders)
delegate the agents (management) to perform decision making practices and some services on
their behalf. As a result of the agency relationship, the costs of the agency occur as a result of
the conflict of interest between the management and the stakeholders, the costs of the agency
are the sum of the control costs, the bonding costs and the residual losses. The information
asymmetry problem occurs because managers have more access to corporate information
than shareholders do. (Shehata, 2014). Consequently, the increasing information asymmetry
and agency conflicts increase the demand for financial reporting and disclosure (Shamki and
Abdul Rahman, 2013). As a result, corporate disclosures are one of the most important means
of communication between management and outside investors that is aimed at decreasing the
information asymmetry between the two parties (Hassan et al.,2009).

Improved corporate disclosure practices are aimed at reducing agency problems through
decreasing the uncertainty concerning future corporate performance (Hassan et al.,2009).
Moreover, releasing information on time can reduce the probability of litigations which
consequently minimizes the litigation costs (Shamki and Abdul Rahman, 2013).

Relating to the agency theory the increased availability of public information is expected to
lead to an increase in the firm’s value through two assumptions. Those two assumptions are
based on the finance theory. The first assumption is related to the security market line and
capital asset pricing model formulas that are used to measure the company’s cost of equity. It
is expected that increased disclosure will decrease the risk surrounding the estimation of
stock returns. Hence, the rate of return required to hold the firm’s shares will decrease.
Consequently, Other factors being constant, the firm’s cost of equity capital will fall and the
firm’s value will rise (Hassan et al.,2009). As the uncertainty surrounding the estimation of
stocks returns decreases through offering investors better opportunities to assess the prospects
of the company, the demand on the company’s securities increases and consequently the
stock liquidity increases as a result of reducing transaction costs (Wang, Jahangir Ali and Al‐
Akra, 2013).

The second assumption is that increased disclosure can impact firm’s value by increasing the
actual cash flow to shareholders due to the decrease in the information asymmetry which will
consequently reduce the amount of cash flows that managers appropriate for themselves
through decreasing the monitoring costs which is eventually expected to increase the firm’s
value (Hassan et al.,2009).

Furthermore, several previous studies have proposed that voluntary disclosure impacts firm’s
value based on signaling theory. Higher disclosure levels lead to higher firm’s value as
comprehensive disclosures send signals to the investors that the company has fewer agency
conflicts and better governance mechanisms, these signals are expected to increase a firm’s
net present value and its stock prices (Uyar and Kılıç, 2012). According to the efficient
market hypothesis stock prices adjust rapidly and accurately in response to all the publically

4
available information. Consequently, the disclosure of any new information will be reflected
promptly and fully on the company’s stock prices (Alfraih, 2017).

Therefore, Given the potential benefits of high corporate disclosure levels on a timely basis in
mitigating information asymmetry between shareholders and managers, and given that it has
the potential to improve the efficiency of capital markets and lead to more informed
investment decisions (Alfraih, 2017), this study predicts that the higher the level of corporate
disclosure on a timely basis, the higher the firm’s value and the higher the liquidity of the
firm’s stocks.

Corporate disclosures:
Corporate disclosure has been defined as the deliberate release and communication of
economic information, whether financial or non-financial, quantitative (numeric) or
qualitative (unstructured textual), this information relates to the firm’s financial performance
and position to be readily available to stakeholders and help them in the decision-making
process (Shehata, 2014). The main goal of corporate disclosure is to communicate
information about the firm performance and corporate governance practices to outside
stakeholders. Disclosures are not solely directed towards investors to analyze the relevance of
their investment decisions but also to other stakeholders particularly for information about
CSR and environmental policies (Farvaque, Refait-Alexandre and Saïdane, 2011). According
to the rules and disclosure requirements of the country in which the firm operates, the firm
discloses corporate information, annually, semi-annually or quarterly. These corporate
disclosures whether financial or non-financial are found in the firms’ annual reports and
companies’ websites, these disclosures can also be released through external sources such as
newspaper articles, social media or analyst reports (Chakraborty and Bhattacharjee, 2020).

Disclosures can be classified into financial and non-financial disclosure. Financial disclosures
include financial statements such as: Balance Sheet, Income Statement, Statement of
Stockholders Equity, Cash -Flow Statement, Accounting policies and explanatory notes that
summarize the company’s financial position and performance, these financial statements are
prepared in accordance with IFRS (CALU et al., 2009). However, these traditional financial
disclosures are no longer sufficient due to the increasing demand of stakeholders for greater
accountability and legitimacy which has introduced greater information disclosure about the
actions carried out by the organizations which are the non-financial disclosures (Sariene,
Cañadas, Valdivieso and Pérez, 2020). Non-financial disclosures include information about
the organization, corporate governance and social responsibility, they reflect information
about intangible capitals such as human capital, relational capital, organizational capital,
environmental capital and social responsibility. Organizations can also include information
regarding intellectual capital, performance indicators, R&D and innovation as a part of non-
financial disclosure (Sariene et al., 2019).

In general, corporate disclosures fall under two broad categories; they are either mandatory
disclosures or voluntary disclosure. Mandatory disclosures are information released by the
company in order to abide by the requirements of laws and regulations which are mainly the
financial statements issued by the company. On the other hand, voluntary disclosure is any
information disclosed in addition to the mandatory disclosure according to the free choice of
management to provide other information related to SCR, environment, corporate governance
or intellectual capital that are considered relevant to the information needs of the stakeholders
(Shehata, 2014). The main aim of voluntary disclosure is to provide a clear image to users of

5
annual reports or stakeholders in general about the business’s long-term sustainability and
future corporate performance which will consequently reduce the information gap between
managers and stakeholders thereby increasing the firm value and generating shareholders’
wealth. In all cases it must be taken into consideration that disclosure shall not affect the
company’s competitive position in the markets where it operates (Chakraborty and
Bhattacharjee, 2020, Egyptian Institute of Directors (EIoD), 2016).

Previous studies in the area of corporate disclosure such as (Elfeky, 2017; Samaha, Dahawy,
Hussainey and Stapleton, 2012; Baldini et al., 2016) have focused on examining the
determinants of corporate disclosure. However, limited literature can be found regarding the
impact of corporate disclosures on firm’s value and stock liquidity especially in developing
markets such as Egypt, only the study of (Hassan et al., 2009) was found in this area and it
has been conducted several years ago and doesn’t take into consideration the effects of the
disclosure and transparency reforms undertaken by the Egyptian government to enhance
corporate disclosure practices and transparency so this study is aimed at covering this gap. In
addition, another research gap to be covered is that previous studies conducted in the area of
economic consequences of disclosures takes into consideration only the levels of corporate
disclosure and ignores the time of disclosure made by companies. However, this study
measures the effect of both the level and the time of voluntary disclosures on the firm’s
value. The time of disclosure will be measured using the earnings announcement lag (Khlif,
Samaha and Azzam, 2015). Those gaps that this study is aimed to cover adds to the
originality and the uniqueness of the paper.

Despite the fact that corporate disclosures are expected to have positive economic
consequences such as an increase in the firm’s value and stock liquidity, providing
information is not a costless task. Many expenses arise from providing information to the
public such as the competitive disadvantage arising from disseminating information to rivals,
litigation costs if the company was sued as a result of the information disclosed and the costs
of adopting an information system to collect, process data and report information about the
company and the costs of hiring accountants and audits (Hassan et al., 2009). Another point
is that more transparency may be costly to established financing relationships, especially with
banks. (Leuz and Wysocki, 2008). Therefore, any decision regarding disclosing any piece of
information must be based upon an accurate cost-benefit analysis. Therefore, this study
assumes that any company will not be willing to disclose any information unless the benefits
of this disclosure exceed its costs resulting in a positive net benefit. Previous studies such as
Morris and Shin (2001) and Anctil, Dickhaut, Kanodia, and Shapiro (2004) suggest that
there are other factors affecting the net benefits of disclosures such as the strategic
uncertainty as Walther (2004) justifies the effect of strategic uncertainty by referring to the
fact that in the decision making process Individuals do not take decisions in isolation, but
instead integrate their perceptions of other decision-makers, which contribute to strategic
uncertainty, which decreases the advantages of greater transparency. (Hassan et al., 2009).

The relationship between disclosure and firm value is still an empirical problem, as the
previous literature, although very limited, has mixed results in this area, some studies indicate
a positive relationship between disclosure and other studies suggest that the benefits of
increased disclosure are sensitive to the form of disclosure being made. They found
favorable, negative and no major associations between the various forms of disclosure and
the valuation of the company. This indicates that there is a dynamic interplay between the
various factors deciding the relationship between disclosure and the value of the company.
(Hassan et al.,2009).

6
This study is aimed to contribute to the current literature by examining the economic
consequences of the disclosure in the emerging market of Egypt characterized by weak
regulatory system and secretive culture and this definitely adds to the value of the research.

Firm’s value:
Firm’s value is considered a very important indicator of the firm’s success in maximizing its
goals of increasing shareholders’ wealth (Tristiarini and Sumaryati, 2018). In this study, it is
intended to investigate the association between different types of disclosures (mandatory and
voluntary disclosures) and the firm value in the Egyptian emerging capital market (Hassan,
2006).
Firm’s value is simply defined as the price that prospective buyers will pay of the company is
sold. Enterprise value (EV) or also known as firm value is an important concept for inventors
as it is used as a metric to assess the value of the company. Firm value is a proxy reflecting
the shareholders’ wealth through the share prices of the firm. (Tristiarini and Sumaryati,
2018). It has been agreed that the value of a company is the cash flows that investors expect
the company to generate, discounted at the company’s cost of capital. The cost of capital is
the rate of return that a company has to offer finance providers to encourage them to buy their
stocks (Neftci and Kosowski, 2015). There are therefore two factors determining firm value:
the cost of capital and potential cash flows. It is proposed that increased transparency may
increase firm value either by increasing the pure cash flow of its shareholders or by
decreasing its cost of capital, or by both, according to the finance theory (Hassan, 2006).
This study considers the cost of equity as a determinant of the firm’s value, it is assumed that
when the cost of equity decreases the firm’s value increases. Therefore, according to the
agency theory higher levels of disclosures is expected to decrease the uncertainty regarding
the stock valuation which decreases the rate of return required by investors to hold the
Company’s stocks (lower cost of equity) which is translated into higher stock prices and
higher firm’s value (Hassan et al.,2009). In this study, two proxies for the firm value will be
used in order to check the accuracy of the results. Those proxies are Tobin’s q ratio and
market equity to book equity ratio. Tobin’s q ratio has been widely used as a proxy for firm
value in prior studies such as (Lang, Lins and Miller, 2003; Lins, 2003; and Doidge, Karolyi
and Stulz, 2004). Tobin’s Q ratio is defined as the ratio of the market value of the outstanding
financial claims on the firm to the current replacement cost of the firm’s assets (Lewellen and
Badrinath,1997). Market to book ratio is also used in the study to measure the firm’s value
which is measured as the market value of equity to the book value of equity at year end.

Effect of Mandatory disclosure on firm’s value:

Previous study conducted in UK by Georgakopoulos, Vasileiou and Sotiropoulos (2013)
investigated the association between mandatory disclosure and company value expressed in
share price anticipation of earnings by using a sample of UK companies included in the FTSE
350 Index for a period of five years, from 2006 to 2010. A mandatory disclosure index was
developed according to the IFRSs, which the companies listed in the stock market were
obliged to adopt since 2005, and was utilized for the quantification of the extent of mandatory
disclosure the results indicated a significant association between company value and the
extent of mandatory disclosure that is consistent with previous research.

Another study was conducted by Tsalavoutas and Dioysion (2014) in Greece a country in the
European union measuring the value relevance of mandatory disclosure on a sample of 150
Greek listed companies, this study found the mandatory compliance score is significantly and
positively related to the firm’s value This indicates that mandatory disclosures do convey
relevant information to the market participants and affect their investing decisions. Those

7
studies showed a positive relation between the levels of mandatory disclosure and firm’s
value.

However, on the other hand, other studies have showed a significant negative relationship
between mandatory disclosures and firm’s value such as a study conducted by Hassan et al.
(2009) on a sample of 80 listed companies from 13 different industrial sectors over the period
1995 to 2002. This result seems puzzling from a traditional perspective but it is somehow
consistent with the expectations of analytical accounting models, which emphasize the
complex interplay of factors determining the economic effects of disclosures. Referring to the
Egyptian market conditions, it is dominated by small investors with limited knowledge of
market conditions who tend not to be active, unlike their counterparts in developed markets.
Before the new listing rules issued in august 2002 there were no administrative penalties for
non-compliant companies and the non-compliance costs were almost non-existent while
compliance costs were relatively high. This justifies the negative relationship found by
Hassan et al. (2009) in her study in which the sample was extracted over the period from
1995 to 2002 which was before the issuance of the new listing rules.

Thus, this study is aimed at examining the relationship after the issuance of the listing rules
which have increased companies’ compliance with mandatory disclosure requirements in
order to avoid the noncompliance costs including monetary penalties and de-listing costs. To
conclude this study is aimed to examine whether the new listing rules and the reforms made
by the Egyptian government to enhance transparency has resulted in a positive relation
between the mandatory disclosure levels and the firm’s value. According to these studies the
following hypothesis is developed.
Hypothesis 1: There is a significant relationship between the level of mandatory
disclosures and firm’s value.

Effect of voluntary disclosure on firm’s value:

Most of the research conducted in the area of corporate disclosures have focused on
voluntary disclosures assuming that all companies are complying with mandatory disclosure
requirements so there is no variation in the compliance levels. A study conducted in turkey by
Uyar and Kılıç (2012) on a sample of 129 manufacturing companies listed on the Istanbul
stock exchange for the year 2010. The main finding of this study is that voluntary disclosure
positively impacts firm’s value, which implies that market participants appreciate voluntary
disclosures. Another study supporting the positive relationship between the voluntary
disclosures and firm’s value was conducted by Al-Akra and Ali (2012) on sample of 243
firm-year annual reports (over a period of 9 years from 1996 to 2004) of privatized Jordanian
firms, the results of this study indicated that voluntary disclosure is positively associated with
the firm’s value. Other studies were found focusing on intellectual capital voluntary
disclosure on of these studies was conducted by Orens, Aerts and Lybaert (2009) to examine
the impact of intellectual capital disclosure on firms’ value in European countries of
(Belgium, France, Germany and the Netherlands), the results indicated that the extent of IC
disclosure is positively associated with firm’s value. Another study conducted in Kuwait by
Alfraih (2017) to examine the effect of the voluntary intellectual capital disclosures on the
market value of the firm on a sample of 195 listed Kuwaiti companies in 2013, the results
indicated a positive significant relationship between IC disclosures and the market value of
the firm suggesting that greater ICD is valued by KSE participants.

On the other hand, other studies in the area of voluntary disclosures were inconsistent with
the existing body of literature and indicated whether a negative or an insignificant

8
relationship between voluntary disclosure and firm’s value. One of those studies was
conducted in china by Wang, Jahangir Ali and Al‐Akra (2013) using a sample of 714 firm
year annual reports of listed companies on the shanghai and Shenzhen stock exchanges over
the period of five years from 2005 to 2009. Surprisingly, this study found that voluntary
disclosure does not create value for the Chinese firms it has also found that during the
financial crisis, voluntary disclosure continues to increase, however, the firm value has
decreased which is inconsistent with the body of literature of voluntary disclosures. Another
study contradicting to the existent literature was conducted by Hassan et al. (2009) in Egypt
to examine the value of voluntary disclosure on a sample of 80 listed companies from 13
different industrial sectors over the period 1995 to 2002 using panel data analysis. The results
of this study indicated that voluntary disclosure has a positive but insignificant relation with
the firm’s value. The lack of significance justifies the view that there is a complex interplay
of different factors determining the relationship between voluntary disclosures and the firm
value. Based on the findings of these studies the following hypothesis is developed.
Hypothesis 2: There is a significant relationship between the level of voluntary disclosures
and firm’s value.

Firm disclosures and stock liquidity:

Stock liquidity is defined as a measure of the ease with which an investment in a stock can be
converted to cash and vice versa. Illiquidity is driven by the costs of buying and selling the
stocks such as commissions and fees, adverse selection costs and the opportunity costs of
holding the stock (Hassan, 2006).
High liquidity of the stocks is a very important issue for investors as high liquidity enables
the immediate execution of standard orders, exhibit prices that are resilient to large orders
and have enough participants trading and sufficient volume to ensure low transaction costs
(Ajina, Sougne and Lakhal, 2015).

Moving on to the relation between the corporate disclosures and stock liquidity, theoretically,
the link between transparency and stock liquidity arises from the reduction of information
asymmetry and consequently the reduction of the adverse selection through enhanced firm’s
disclosures (BISCHOF and DASKE, 2013). Many empirical studies support the notion of
positive relationship between a firm’s disclosure levels and the liquidity of its shares. A study
conducted by DASKE, HAIL, LEUZ and VERDI (2013) to examine liquidity and cost of
capital effects around voluntary and mandatory IAS/IFRS adoptions on a sample consisting
of all world scope firms from 1990 to 2005. This study showed a significant positive
relationship between the levels of disclosures and stock liquidity.

Another study conducted by Ajina, Sougne and Lakhal (2015) on a sample of 196 French
listed firms over the period ranging from 2004 to 2007. The findings of this study indicate
that the level of corporate disclosures in annual reports has a positive impact on the liquidity
of the French market. Another study supporting the significance of the relationship between
the disclosures and stock liquidity was conducted by Agarwal, Mullally, Tang and Yang
(2013) to examine the impact of mandatory portfolio disclosure by mutual fund on stock
liquidity. The results showed that compliant firms experience larger increases in liquidity
than the noncompliant firms. Another study focusing on voluntary disclosures only conducted
by Schoenfeld (2017) to test whether voluntary disclosures affects stock liquidity on a sample
of S&P 500 index inclusion sample from 1996 to 2010. The results of these studies indicate
that an increase in disclosure is associated with increased stock liquidity. These findings
suggest that voluntary disclosure increases the liquidity of the stock. One study conducted in
Iran has violated the existent literature which was conducted by Ghorbani et al. 2015 to

9
examine the relationship between corporate disclosures and liquidity of stocks in the
emerging stock market of Iran on a sample of 80 firms listed on the Tehran stock exchange
during 2009-2013, this study didn’t show a significant relationship between disclosures level
and stock liquidity.

According to these results, this study is expecting a positive relationship between the
disclosure levels and the stock liquidity despite, the fact that those results were achieved in
developed markets except for the study conducted in the emerging market of Iran. Therefore,
according to these studies, it is expected that higher disclosure levels will increase the
liquidity of the firm’s stock based on the agency and finance theories as the uncertainty
surrounding the estimation of stocks returns decreases through offering investors better
opportunities to assess the prospects of the company, the demand on the company’s securities
increases and consequently the stock liquidity increases as a result of reducing transaction
costs (Wang, Jahangir Ali and Al‐Akra, 2013), consequently the following hypothesis is
developed:
Hypothesis 3: There is a significant relationship between both mandatory and voluntary
disclosures levels and the stock liquidity.

Timely disclosures:
It is not enough to measure the quantity of disclosures solely however; a quality attribute
should be added to the level of disclosure which is the time of corporate disclosures in order
to increase the originality of the study as few studies such as that conducted by Khlif, Samaha
and Soliman (2019) and another study conducted by Khlif, Samaha and Azzam (2015) have
considered the effect of the timely disclosures in Egypt in specific. Therefore, this study is
considered from the few studies that considers the time of corporate disclosures as an
independent variable and its effect will be measured on the firm’s value and the stock
liquidity. One of the important components of the corporate transparency is the timely
disclosure as it reflects the quality of the information disclosed (Bushman, PIOTROSKI and
SMITH, 2004). The timely disclosures are proxied using the earnings announcement lag
which is measured by the number of days between the fiscal year and the earnings
announcement date (Khlif, Samaha and Azzam, 2015). Longer EAL increases uncertainty
among investors because it implies high estimation risks and thus higher cost of equity which
is translated into lower firm’s value. However, shorter EAL means higher value and quality
for disclosures which will decrease the risk regarding the future corporate performance and
stock valuation and consequently increase the firm’s value (Evans, 2011). Therefore, timely
reporting in developing markets such as Egypt is of high importance since disclosure levels in
these markers are low and has a longer time lag (Afify, 2009). More timely disclosures
(shorter EAL) is needed in Egypt in order to reduce the information asymmetries and enhance
the decision-making process which will reduce the firm’s cost of equity and consequently is
expected to increase the firm’s net present value (Khlif, Samaha and Azzam, 2015).

Hypothesis 4: There is a significant relationship between timely disclosures and firm’s

value and stock liquidity.

Overview about disclosure requirements and financial reporting regulations in

Egypt:
In Egypt, the annual report is the main official disclosure vehicle for companies listed in the
Egyptian stock exchange. Both semi-annual and annual financial statements are required,
each listed company should submit copies of their financial statements to both the capital

10
market authority and the EGX and to publish a summary of them in two daily newspapers at
least one of which must be in Arabic. Regarding the mandatory financial disclosures required
by CMA annual reports issued by the firms must include: the balance sheet, the income
statement, the cash flow statement, the statement of changes in equity, the notes to the
accounts, the board of directors' report, the external auditor's report, accounting policies,
estimated budgets, and the valuation methods of assets and dividends (Egyptian Institute of
Directors (EIoD), 2016).
Moving on to the voluntary non-financial disclosures, some of them are regulated
(mandatory) such as: share class voting rights, board remuneration, and details of board
members and senior management. other non-financial disclosures are up to the management’s
free choice such as ethical and environmental disclosures, SCR disclosures, intellectual and
human capital disclosures which are very rare or non-existent in the Egyptian context
(Hassan et al.,2009).
Low levels of corporate disclosures and weak corporate governance practices in Egypt have
led to a series of institutional and corporate scandals such as bank failures in 2000. Another
scandal arising from weak controls is the Egyptian General Petroleum Corporation (EGPC)
bribery scandal (2007) and the public pension fund mismanagement scandal (2007). (2002-
2004). Therefore, corruption level is very high in the Egyptian context as Egypt was ranked
106 with a score of 35 by transparency international in 2019 on the corruption perception
index (CPI) (Rashad, Ahmed and Nokhal, 2018).

In attempt to enhance disclosure and transparency in Egypt, the country has gone through
several phases of economic reforms in the past years. In order for these economic reforms to
succeed, the legal and institutional structures must be improved in order to match the
international standards.
In 2005 and 2006, two governance codes were issued to overhaul corporate governance in
Egypt, the Egyptian corporate governance code for public firms in 2005 and the corporate
governance code for state-owned enterprises in 2006. In addition to the issuance of a new set
of Egyptian accounting principles established in compliance with IFRS. Those standards
were issued in 2006 by the ministry of investment. The problem with Egypt is the limited or
non-existent penalties for non-compliance. Consequently, the lack of enforcement of those
penalties makes even compliance with mandatory disclosure requirements voluntary. In the
long run, this resulted in a negative perception among investors with regards to public
disclosure in Egypt (El-Diftar et al.,2017).

However, when the International Monetary Fund under the ROSC Program (Reports on the
Enforcement of Standards and Codes) reviewed corporate governance practices in Egypt in
2001, it revealed that the best scores obtained were in the category of stakeholders' position
in corporate governance, and the worst was achieved in the category of accountability and
transparency. However, the ROSC’s subsequent report issued in 2004 revealed a general
improvement of corporate governance applications between 2001 and 2004. This
improvement was a result of legislative reform that took place in 2002 when the Egyptian
stock exchange issued new listing rules, those rules mainly focused on timely disclosure of
corporate actions, financial statements (annual and quarterly) in addition to material events
by issuers, prohibiting insider trading, encouraging good corporate governance practices by
issuers , establishing an audit committee and imposing for the first time penalties on issuers
in case of failure to disclose on time. Those penalties include aggressive fines and
suspensions from trading which encourage many illiquid companies to delist (El-Diftar et
al.,2017; Abdel-Fattah, 2008).

11
 Subsequent to these rules, in 2003, the Egyptian institute of directors (EIoD) was established
which issues a report annually focusing on issues of corporate governance and protection of
investors rights. Another ROSC assessment took place in 2009 has revealed an overall
improvement but still with regard to disclosure and transparency, the report still emphasized
the inadequacy of non-financial disclosure and on the uneasiness to access both financial and
non-financial information. In conclusion, the three assessments made by ROSC emphasized
the importance of enhancing the disclosure practices in Egypt as the compliance disclosure
requirements regarding the financial, ownership structure, auditing, board of directors and
CSR was very poor compared with other emerging markets.
Previous studies such as El-Diftar et al. (2017) and Abdel-Fattah (2008) concluded that the
main reason behind low levels of disclosures in the Egypt is the national culture as Egypt’s
national culture has always been characterized by statutory control, uniformity, secrecy and
conservatism. In addition to the culture, the nature of the Egyptian investors as previous
studies suggested that they are more interested in the profit figure rather than any of the other
ratios, this might be because most of the investors are small and unsophisticated investors
having little incentive to acquire information relevant to the valuation of securities which
leads to low disclosure levels (Hassan, 1999). This shows the vital necessity of finding ways
to enhance the levels of disclosures and overall transparency of companies in Egypt which is
the main reason this study was conducted as despite the reforms which took place in the past
years there is a long journey ahead of Egypt in order to implement corporate governance and
disclosure practices efficiently, especially as Egypt nowadays is attracting more foreign
investors. Thus, disclosure practices in Egypt should match those of other emerging markets,
which would result in better corporate performance, better access to capital, improved
shareholder relationships and eventually lead to overall development of the capital market
(El-Diftar et al., 2017).
Thus, the main aim of this paper is to drag regulators’ and management attention to
importance of corporate disclosure especially in Egypt, through examining the relationship
between voluntary and mandatory corporate disclosure levels in Egypt and firms’ value and
stock liquidity in the post-reform period that has taken place in Egypt regarding corporate
governance practices, disclosure and transparency to find out whether those reforms have
increased the value of corporate disclosures made by Egyptian companies and whether those
reforms led to an increase in the firm value and stock liquidity of the Egyptian companies.
The last study conducted in this area was conducted by Hassan et al. (2009) and the sample
was from 1997 to 2002, so no previous research has been conducted after this period. Thus,
the study is aimed to cover this gap and take into consideration the post-reform period.

12
Research methodology:
Type of research:
This research examines the economic consequences of corporate disclosures in the emerging
economy of Egypt. The economic consequences represent the firm value and the liquidity of
its stocks. In order to measure the effect of corporate disclosures on firm value a quantitative
research was conducted as secondary data were collected from the annual reports and the
financial statements of the listed companies and the data analysis mainly depends on
statistical models such as correlation, regression and other statistical models.

Data collection and variable measurement:

Sample and data:

As this study is concerned with examining the effect of corporate disclosures on firm’s value
and stock liquidity in the Egyptian market, the sample was drawn from Egyptian companies
listed on the Egyptian stock exchange specifically those listed on EGX 30 representing the
top 30 companies in terms of activity and liquidity. EGX 30 was chosen in specific as it is
believed to be representative of the best performing, actively traded Egyptian companies and
consequently abiding by the disclosure requirements more than other companies. Therefore,
EGX 30 was chosen in specific as it is a good and reputable barometer for the Egyptian
market.

Finance and insurance companies listed on EGX 30 were excluded as their annual reports
may not be comparable to those of other companies’ due to their specific disclosure
requirements and financial characteristics (Khlif, Samaha and Azzam, 2015; Elfeky, 2017).
Therefore, the final sample consists of 16 companies listed on EGX 30 over a five-year
period spanning from 2015 to 2019 resulting in 80 firm-year observation. Companies chosen
are operating in a variety of different industries including: basic resources, health care,
automobiles, real estate, IT, media and communication services, food and beverage, energy
and support services, textiles and durables.

Regression equation:

Firm’s value:

FVι τ =α it + β 1 VDLit + β 2 MDLit + β3 EALit + β 4 LVGit + β 5 ASit + β 6 Pit + β 7 Git + ε it

Stock liquidity:

STLι τ =α it + β 1 VDL it + β 2 MDLit + β3 EALit + β 4 MDT it + β5 AS it + β 6 Pit + β 7 G it + ε it

13
The dependent variables are the FV which refers to the firm value measured using the market
to book ratio of equity and the STL which refers to the stock liquidity and measured by the
effective bid ask spread. Regarding the independent variables, they are the VDL which refers
to the voluntary disclosure score, the MDL which refers to the mandatory disclosure score the
disclosure scores for mandatory and voluntary corporate disclosures are measured using the
disclosure index technique. Moving on to the control variables, the LVG refers to the level of
financial leverage measured by the debt to equity ratio, the AS refers to the asset size which
is measured by the natural logarithm of total assets. The P refers to the profitability and is
measured by the return on equity. Finally, the G refers to the growth which is measured by
the natural logarithm of the ratio of sales in the current year divided by sales in the previous
year.

Variables measurement:
Independent variables:
a) Disclosure level:
The level of corporate disclosures for the Egyptian non-financial listed companies on the
EGX 30 is measured by the disclosure index technique (Hassan et al., 2009; Khlif, Samaha
and Azzam, 2015; Elfeky, 2017). The extent of the corporate disclosures is a measure of the
quantity of mandatory and voluntary information disclosed in the companies’ annual reports
(Khlif, Samaha and Azzam, 2015). The checklist contains two indices one for the mandatory
disclosure items and the other for voluntary disclosure items.

Regarding the mandatory disclosure index, the checklist was constructed based on the
checklist that was used by Hassan et al. (2009). This list of items of information was drawn
from the checklist for the disclosure and transparency requirements of the Egyptian CMA
(Capital Market Authority). The mandatory disclosure index used in the study consists of 50
mandatory items of information that the companies should disclose in their annual reports
(Hassan et al., 2009).

Moving on to the construction of the voluntary disclosure index, a checklist was constructed
based on the most recent and updated information on the Egyptian setting by Khlif, Samaha
and Azzam (2015) in their study on the effect of voluntary disclosure on the cost of equity
capital in the emerging market of Egypt. In addition to the checklist used by Elfeky (2017) in
his study measuring the determinants of the voluntary disclosure in the Egyptian market. The
newly combined checklist is divided into 14 subparts representing the categories of voluntary
disclosure resulting in a total of 153 disclosure items. These categories are classified
according to the following subparts: general information, corporate strategy, forward looking
information, corporate governance, financial performance, shares information, risk
management index, accounting policies, non-financials, human resources, corporate social
responsibility, environmental disclosure, research and development and other voluntary
disclosure items related to the financial statements.

Each item of disclosure on both the mandatory and the voluntary disclosure indices was given
an unweighted score on a dichotomous basis (Khlif, Samaha and Azzam, 2015). Each item
was given an equal weight by giving the item of information the value of one if disclosed and

14
the value of zero if not disclosed. Each disclosure index (mandatory and voluntary) is
measured as the sum of scores given to a specific company in a specific year divided by the
maximum number of applicable items (Hassam et al.,2009; Ghazali and Weetman, 2006).

Content analysis was used in order to assign disclosure scores to each company. The data was
obtained from the annual reports and the standalone financial statements published on the
websites of some companies and from the BOD report and the shareholder reports for other
companies who don’t release annual reports, this data was obtained from EGID.

b) Disclosure time:
The previous proxy for corporate disclosure (disclosure index) is concerned with the quantity
of corporate disclosures without taking into consideration other aspects of transparency that
measures the quality of information such as timely disclosures. Timely disclosure is
measured by earnings announcement lag measured by the number of days between the fiscal
year end and the earning announcement date. The timely disclosures serve as an important
aspect of corporate transparency as it gives rise to the value and the quality of information
disclosed in the company’s annual reports (Khlif, Samaha and Azzam, 2015; Guidara and
Achek, 2015).

Dependent variables:

c) Firm value:

Firm value is a proxy reflecting the shareholders’ wealth through the share prices of the firm.
(Tristiarini and Sumaryati, 2018). The natural logarithm of the ratio of market value of equity
to the book value of equity is used as a proxy for the firm’s value (Hassan et al., 2009;
Lemmon and Lins, 2003; Uyar and Kiliç, 2012; Abdi, Li and Càmara-Turull, 2020). This
ratio is used as it shows whether the company’s stocks is undervalued or overvalued by
dividing the market value of outstanding shares by the book value of the company’s equity. If
the market to book ratio of equity is greater than one this means that the firm is overvalued, if
it is less than one this means that the firm is undervalued. This ratio was chosen in specific as
the results of previous studies using the market to book value of equity as a proxy for firm
value examining the effect of disclosures on firm value has been contradicting. Hassan et al.
(2009) in her study that examines the effect of mandatory and voluntary disclosure on firm’s
value found a highly significant negative relationship between mandatory disclosure and
firm’s value measured by market to book ratio of equity. The results of this study also
showed a positive but insignificant relationship between the voluntary disclosure and the
firm’s value. Another study examining the effect of voluntary disclosure on the firm value
proxied by the market to book ratio of equity was conducted by (Uyar and Kiliç) in (2012),
the results showed a positive significant relationship between the voluntary disclosure levels
and firm value proxied by the market to book ratio of equity.

Moreover, the study uses the market to book ratio as a measure for the firm value rather than
the market value of equity alone as according to Berk (1995) the ratio of the market equity to
book equity is a better measure of the continuously compounded expected return than is the

15
market value of equity alone. In addition, Fama and French (1992) that the market to book
ratio of equity is more powerful in term of significance and magnitude of the relationship
than the logarithm of the market value of equity in interpreting average returns.

In order to make the firm value reflect the effect of corporate disclosures, the market to book
value of equity ratio is measured in the following way. The nominator which is the market
value of equity is calculated by multiplying the number of shares outstanding by the average
share price over six months after the financial year end, in order to ensure that the accounting
information and disclosures in companies’ annual reports are reflected in the share prices.
Moving on to the denominator the book value of equity is the book value on the company’s
balance sheet at the financial year end. Moreover, a logarithm transformation is used in order
to reduce the influence of extreme values and to bring the distribution of the variables back to
normality (Hassan et al., 2009; Tsalavoutas and Dioysion,2014; Khlif, Samaha and Azzam,
2015).

d) Stock liquidity:

According to Black (1971) the market for a certain stock is considered liquid under the
following conditions: if the investor wants to sell the stock immediately there must always be
bid and asked prices for the stock and the difference between the bid and asked prices (the
spread) is always small (Gopalan, Kadan and Pevzner, 2012; Ghorbani et al., 2015; Ajina,
Sougne and Lakhal, 2015). Therefore, annual average effective bid-ask spread as a measure
for liquidity. This measure is also used as previous studies using this measure have been
contradicting as this measure for liquidity was used by Ajina, Sougne and Lakhal (2015) to
study the effect of corporate disclosures on information asymmetry and stock market liquidity
in France on a sample of 196 French listed firms the results of this study that uses the
effective spread to measure liquidity showed that the extent of corporate disclosures in annual
reports has a positive effect on the liquidity of the French market and has a negative effect on
the adverse selection component of the bid-ask spread. On the other hand, Ghorbani et al.
(2015) used the same measure of liquidity to examine the effect of corporate disclosures on
stock liquidity and they found no significant relation between the two variables. Therefore,
the effective annual bid-ask spread is used to examine whether there is a positive or a
negative relationship between corporate disclosure and stock liquidity in the emerging market
of Egypt.

Due to the information asymmetry problem, the bid-ask spread includes the issue of adverse
selection. In case of information asymmetry, the bid-ask spread increases and consequently
the liquidity decreases. The annual average effective bid-ask spread is calculated from daily
stock data. The bid and ask prices are identified from the intra-day transaction data from
investing.com. The effective bid-ask spread for any stock is equal to the ratio of the absolute
difference the trade price (ask-bid) and the mid-point of the associated quote and the trade-
price. The effective spread is then averaged over the year to obtain the spread (Gopalan,
Kadan and Pevzner, 2012). The bid-ask spread was chosen in specific as a measure of

16
liquidity as it is one of the most common and frequently used measures of liquidity in the
previous literature of stock liquidity as it reflects the immediacy dimension of liquidity
(Tayeh, 2010).

Effective bid-ask spread=aski,d,t bid i,d,t /aski,d,t bidi,d,t / 2

where aski,d,t and bidi,d,t are the ask price and the bid price for stock i on day d in month t
respectively.

Control variables:
In the data analysis for this research, four control variables are included that have been found
in the literature to be correlated with the firm’s value (Khlif, Samaha and Azzam, 2015).
These control variables are: asset size, profitability, leverage, growth (Baek et al., 2004; Lang
et al., 2003; Silva & Alves, 2004). The first control variable expected to have an effect on the
relation of disclosure and firm value is the asset size. The asset size is measured by the
natural logarithm of the book value of assets (Hassan et al., 2009). Previous research
suggested such as (Berk, 1995) that relatively large companies in terms of asset size are
expected to have higher firm values. Another reason the asset size is used as a control
variable is that the sample has different company sizes. Moving on to the second control
variable which is the profitability, the profitability is proxied using the Return on Equity
which is calculated by dividing the net income by equity book value) (Khlif, Samaha and
Azzam, 2015). As the research is conducted in the Egyptian context, it is expected that the
profitability is positively correlated with the firm value, since investors in Egypt are not much
sophisticated as they pay more attention to profit figures (Hassan et al., 2009).

Moving on to the leverage as a control variable it is calculated by the natural logarithm of the
ratio of long-term debt to book value of equity at financial year-end. Previous research (Lins
2003) suggests that creditors are expected to mitigate the agency problems as they act as
external monitors who play a role in reducing the managerial agency problem as they have a
beneficial governance role, therefore, a positive correlation between leverage and firm value
is expected. Moving on to the fourth control variable which is the growth measured as the
natural logarithm of the ratio of sales in the current year divided by sales in the previous year.
As for growth, the same case exists in the Egyptian context as with profitability as the
Egyptian market is dominated by individual investors focusing on the short-term return.
Consequently, growing dividends in the future is expected for higher growth companies,
therefore, a positive correlation between firm value and sales growth might be expected
(Hassan et al., 2009).

17
Variable Proxies
Dependent variables:
Firm’s value  MTBR (Market value of equity to book value of
equity) (Hassan et al.,2009)

 Tobin’s Q ratio the ratio of the market value of the

outstanding financial claims on the firm to the
current replacement cost of the firm’s assets
(Hassan,2006)

Stock liquidity  Effective annual bid-ask spread (Gopalan, Kadan

and Pevzner, 2012) (Tayeh, 2010).

Independent variables:
Mandatory disclosures Disclosure score using mandatory disclosure index
(Hassan et al.,2009)

Voluntary disclosures: Disclosure score using voluntary disclosure index (Hassan

et al.,2009)

Timely disclosures: Earnings announcement lag (EAL) measured by the

number of days between the fiscal year and the earnings
announcement date. (Khlif, Samaha and Azzam, 2015)

Control variables:
The natural logarithm of book value of total assets at
Asset size:
financial year-end divided by the book value of equity at
financial year-end (Hassan et al.,2009).

Profitability: Return on Equity (net income divided by equity book

value) (Khlif, Samaha and Azzam, 2015)

18
 Leverage:
Debt-to-equity ratio (Khlif, Samaha and Azzam, 2015).

Growth:
The natural logarithm of the ratio of sales in the current
year divided by sales in the previous year (sales / sales(−
1) (Hassan et al.,2009).

Voluntary disclosure Stock liquidity

Control variables measured by
levels and time Asset size The daily turnover of the
Profitability company's share

Leverage
Growth
Mandatory Audit firm size
disclosure levels and Firm's value
time Market to book ratio of
equity,Tobin's Q

Mean Median Mode Standar Minimu Maximum

d m
deviation
MTBR 0.046720 0.027779 -1.652561 0.734212 -1.652561 2.140822
NLTA 9.945965 10.050455 8.722231 0.611104 8.722231 13.462424
ROE 0.032159 0.050908 -0.659231 0.141566 -0.659231 0.571130
LEV -2.028294 -1.035717 -10.332017 2.866059 -10.332017 0.353459
GROWTH 0.032159 0.050908 -0.659231 0.141566 -0.659231 0.571130
MDL 44.312500 44.000000 42.000000 2.108414 41.000000 48.000000

19
VDL 74.362500 66.000000 66.000000 19.792112 43.000000 128.000000
STLQ 0.033023 0.032551 0.017241 0.007602 0.017241 0.049187
EAL 64.300000 59.000000 57.000000 23.455533 29.000000 167.000000
Tobin’s Q 3.461152 1.018216 0.030811 9.268986 0.030811 58.685621

References:
Alfraih, M., 2017. The value relevance of intellectual capital disclosure: empirical evidence
from Kuwait. Journal of Financial Regulation and Compliance, 25(1), pp.22-38.

Aly, D., El-Halaby, S. and Hussainey, K., 2018. Tone disclosure and financial performance:
evidence from Egypt. Accounting Research Journal, 31(1), pp.63-74.

Bokpin, G., Isshaq, Z. and Nyarko, E., 2015. Corporate disclosure and foreign share
ownership: empirical evidence from African countries. International Journal of Law and
Management, 57(5), pp.417-444.

Elfeky, M., 2017. The extent of voluntary disclosure and its determinants in emerging
markets: Evidence from Egypt. The Journal of Finance and Data Science, 3(1-4), pp.45-59.

Gunawan, H. and Octa Lina, E., 2015. Mandatory and Voluntary Disclosure of Annual
Report on Investor Reaction. International Journal of Economics and Financial Issues, (5).

Hassan, O., Romilly, P., Giorgioni, G. and Power, D., 2009. The value relevance of
disclosure: Evidence from the emerging capital market of Egypt. The International Journal
of Accounting, 44(1), pp.79-102.

20
Khlif, H., Samaha, K. and Soliman, M., 2019. Internal control quality, voluntary disclosure,
and cost of equity capital: The case of an unregulated market. International Journal of
Auditing, 23(1), pp.144-160.

Matusiewicz, A. and Jaworska, A., 2015. Determinants of the level of information disclosure
in financial statements prepared in accordance with IFRS. Accounting and Management
Information Systems, 14(3).

Mostafa, W., 2016. The value relevance of earnings, cash flows and book values in
Egypt. Management Research Review, 39(12), pp.1752-1778.

Samaha, K., Dahawy, K., Hussainey, K. and Stapleton, P., 2012. The extent of corporate
governance disclosure and its determinants in a developing market: The case of Egypt.
Advances in Accounting, 28(1), pp.168-178.

Shamki, D. and Abdul Rahman, A., 2013. Does financial disclosure influence the value
relevance of accounting information? Education, Business and Society: Contemporary
Middle Eastern Issues, 6(3/4), pp.216-232.

Shehata, N., 2014. Theories and Determinants of Voluntary Disclosure. Accounting and

Finance Research, 3(1).

Tsalavoutas, I. and Dionysiou, D., 2014. Value relevance of IFRS mandatory disclosure
requirements. Journal of Applied Accounting Research, 15(1), pp.22-42.

Uyar, A. and Kılıç, M., 2012. Value relevance of voluntary disclosure: evidence from
Turkish firms. Journal of Intellectual Capital, 13(3), pp.363-376.

Wagenhofer, A. (2004). Accounting and economics: What we learn from analytical models in
financial accounting and reporting. In C. Leuz, D. Pfaff, & A. Hopwood (Eds.), The
Economics and Politics of Accounting Oxford: OUP.

Wang, Z., Jahangir Ali, M. and Al‐Akra, M., 2013. Value relevance of voluntary disclosure
and the global financial crisis: evidence from China. Managerial Auditing Journal, 28(5),
pp.444-468.

A. Bokpin, G., 2013. Determinants and value relevance of corporate disclosure Evidence
from the emerging capital market of Ghana. Journal of Applied Accounting Research, 14(2),
pp.127-145.

Khlif, H., Samaha, K. and Azzam, I., 2015. Disclosure, ownership structure, earnings
announcement lag and cost of equity capital in emerging markets. Journal of Applied
Accounting Research, 16(1), pp.28-57.

Literature review references:

Chakraborty, B. and Bhattacharjee, T., 2020. A review on textual analysis of corporate

disclosure according to the evolution of different automated methods. Journal of Financial
Reporting and Accounting, 18(4), pp.757-777.

21
CALU, D., DUMITRU, M., PITULICE, l., AVRAM, V., ŞTEFĂNESCU, A. and
PONORÎCĂ, A., 2009. A RESEARCH ON THE FINANCIAL DISCLOSURE CHOICES
WITHIN LISTED COMPANIES. The Annals of the "Ştefan cel Mare" University Suceava.
Fascicle of The Faculty of Economics and Public Administration, 9(1).

Rashad, H., Ahmed, A. and Nokhal, A., 2018. the Effect of Internal Corporate Governance
Mechanisms on the Disclosure of Internal Control Material Weaknesses with a Field
Study. )5(4 ,‫مجلة الدراسات التجاریة المعاصرة‬، pp.1-64.

Egyptian Institute of Directors (EIoD), 2016. The Egyptian Corporate Governance Code.

Cairo.

Abdel-Fattah, T., 2008. VOLUNTARY DISCLOSURE PRACTICES IN EMERGING

CAPITAL MARKETS: THE CASE OF EGYPT. Ph.D. Durham Business School.

HASSAN, O., 1999. E INTRODUCTION AND APPLICATION OF INTERNATIONAL

ACCOUNTING STANDARDS TO ACCOUNTING DISCLOSURE REGULATIONS OF A
CAPITAL MARKET IN A DEVELOPING COUNTRY: THE CASE OF EGYPT. B.Sc., M.Sc.
School of Management Heriot- Watt University Edinburgh, UK.

El-Diftar, D., Jones, E., Ragheb, M. and Soliman, M., 2017. Institutional investors and
voluntary disclosure and transparency: the case of Egypt. Corporate Governance: The
International Journal of Business in Society, 17(1), pp.134-151.

Afify, H., 2009. Determinants of audit report lag. Journal of Applied Accounting Research,
10(1), pp.56-86.

Tristiarini, N. and Sumaryati, A., 2018. The Influence of Cost of Equity on Financial Distress
and Firm Value. Advances in Economics, Business and Management Research, 46(1),
pp.194,197.

Ajina, A., Sougne, D. and Lakhal, F., 2015. Corporate Disclosures, Information Asymmetry
and Stock-Market Liquidity in France. Journal of Applied Business Research (JABR), 31(4),
p.1223.

Leuz, C. and Wysocki, P., 2008. Economic Consequences of Financial Reporting and
Disclosure Regulation: A Review and Suggestions for Future Research. SSRN Electronic
Journal.

BISCHOF, J. and DASKE, H., 2013. Mandatory Disclosure, Voluntary Disclosure, and Stock
Market Liquidity: Evidence from the EU Bank Stress Tests. Journal of Accounting Research,
51(5), pp.997-1029.

DASKE, H., HAIL, L., LEUZ, C. and VERDI, R., 2013. Adopting a Label: Heterogeneity in
the Economic Consequences Around IAS/IFRS Adoptions. Journal of Accounting Research,
51(3), pp.495-547.

22
Agarwal, V., Mullally, K., Tang, Y. and Yang, B., 2013. Mandatory Portfolio Disclosure,
Stock Liquidity, and Mutual Fund Performance. SSRN Electronic Journal,

Farvaque, E., Refait-Alexandre, C. and Saïdane, D., 2011. Corporate disclosure: a review of
its (direct and indirect) benefits and costs. International Economics, 128, pp.5-31.

Orens, R., Aerts, W. and Lybaert, N., 2009. Intellectual capital disclosure, cost of finance and
firm value. Management Decision, 47(10), pp.1536-1554.

Neftci, S. and Kosowski, R., 2015. Engineering of Equity Instruments and Structural Models
of Default. Principles of Financial Engineering (Third Edition), (3).

Schoenfeld, J., 2017. The effect of voluntary disclosure on stock liquidity: New evidence
from index funds. Journal of Accounting and Economics, 63(1), pp.51-74.

Wang, Z., Jahangir Ali, M. and Al‐Akra, M., 2013. Value relevance of voluntary disclosure
and the global financial crisis: evidence from China. Managerial Auditing Journal, 28(5),
pp.444-468.

Khlif, H., Samaha, K. and Soliman, M., 2019. Internal control quality, voluntary disclosure,
and cost of equity capital: The case of an unregulated market. International Journal of
Auditing, 23(1), pp.144-160.

Farvaque, E., Refait-Alexandre, C. and Saïdane, D., 2011. Corporate disclosure: a review of
its (direct and indirect) benefits and costs. International Economics, 128, pp.5-31.

Evans, M., 2011. Commitment and Cost of Equity Capital: An Examination of Timely
Balance Sheet Disclosure in Earnings Announcements. SSRN Electronic Journal.

BUSHMAN, R., PIOTROSKI, J. and SMITH, A., 2004. What Determines Corporate
Transparency? Journal of Accounting Research, 42(2), pp.207-252.

Baldini, M., Maso, L., Liberatore, G., Mazzi, F. and Terzani, S., 2016. Role of Country- and
Firm-Level Determinants in Environmental, Social, and Governance Disclosure. Journal of
Business Ethics, 150(1), pp.79-98.

Al-Akra, M. and Ali, M., 2012. The value relevance of corporate voluntary disclosure in the
Middle-East: The case of Jordan. Journal of Accounting and Public Policy, 31(5), pp.533-
549.

Lins, K.V. (2003) ‘Equity ownership and firm value in emerging markets’, Journal of
Financial and Quantitative Analysis, Vol.38, No.l, (March), pp.159-184.

Lang, M.H, Lins, K.V. and Miller, D. (2003) ‘ADRs, analysts, and accuracy: does cross
listing in the U.S. improve a firm’s information environment and increase market value?’
Journal of Accounting Research, Vol.41, No.2, (May), pp.317-345.

Doidge, C.; Karolyi, G.A. and Stulz, R.M. (2004) ‘Why are foreign firms listed in the U.S.

23
worth more?’ Journal of Financial Economics, Vol.71, No. 2, (February), pp.205-238.

Ghorbani, B., Salehi, M., Rostami, V. and Kazemi, H., 2015. The Relationship between
Voluntary Disclosure and Stock Liquidity of Listed Companies on the Tehran Stock
Exchange. Mediterranean Journal of Social Sciences, 6(2), pp.84-94.

Sariene, L., Cañadas, J., Valdivieso, F. and Pérez, C., 2020. Non-Financial Information
versus Financial as a Key to the Stakeholder Engagement: A Higher Education
Perspective. Sustainability, 12.

Morris, S., & Shin, H. S. (2001). Coordination risk and the price of debt. (Working Paper),
available on the internet at http://www.nuff.ox.ac.uk/users/Shin/pdf/sys2.pdf.

Anctil, R. M., Dickhaut, J., Kanodia, C., & Shapiro, B. (2004). Information transparency and
coordination failure: Theory and experiment. Journal of Accounting Research, 42(2),
159−195

Walther, B. R. (2004). Discussion of information transparency and coordination failure:

Theory and experiment. Journal of Accounting Research, 42(2), 197−205.

Hassan, O.A.G. (2006). The Economic Consequences of Increased Disclosure in the Egyptian
Emerging Capital Market. PhD Thesis, University of Abertay Dundee, UK.

Lang, M.H, Lins, K.V. and Miller, D. (2003) ‘ADRs, analysts, and accuracy: does cross
listing in the U.S. improve a firm’s information environment and increase market value?’
Journal of Accounting Research, Vol.41, No.2, (May), pp.317-345.

Lins, K.V. (2003) ‘Equity ownership and firm value in emerging markets’, Journal of
Financial and Quantitative Analysis, Vol.38, No.l, (March), pp.159-184.

Doidge, C.; Karolyi, G.A. and Stulz, R.M. (2004) ‘Why are foreign firms listed in the U.S.
worth more?’ Journal of Financial Economics, Vol.71, No. 2, (February), pp.205-238.

Lewellen, W.G. and Badrinath, S.G. (1997) ‘On the measurement of Tobin’s q’, Journal of
Financial Economics, Vol. 44, No. 1, pp.77-122.

Georgakopoulos, G., Vasileiou, K. and Sotiropoulos, I., 2013. Mandatory Disclosure and Its
Impact on the Company Value. international Business Research, [online] 6(5). Available at:
<http://dx.doi.org/10.5539/ibr.v6n5p1> [Accessed 22 January 2021].

Al-Akra, M. and Ali, M., 2012. The value relevance of corporate voluntary disclosure in the
Middle-East – The case of Jordan. Journal of Accounting and Public Policy, 5(31).

Mohammadi, J. and Fakhari, H., 2017. The Impact of Organizational Culture on Voluntary
Disclosure (Evidence from Tehran Stock Exchange). International Journal of Finance and
Managerial Accounting, 2(6), pp.23-36.

24
Methodology:

Gopalan, R., Kadan, O. and Pevzner, M., 2012. Asset Liquidity and Stock Liquidity. Journal of
Financial and Quantitative Analysis, 47(2), pp.333-364.

Tayeh, M., 2010. A Comparative Analysis of the Determinants and Pricing of Liquidity in Floor and
Electronic Trading Systems. Doctor of Philosophy in Finance. University of Durham.

Mohd Ghazali, N. and Weetman, P., 2006. Perpetuating traditional influences: Voluntary disclosure in
Malaysia following the economic crisis. Journal of International Accounting, Auditing and Taxation,
15(2), pp.226-248.

Lemmon, M. and Lins, K., 2003. Ownership Structure, Corporate Governance, and Firm Value:
Evidence from the East Asian Financial Crisis. The Journal of Finance, 58(4), pp.1445-1468.

Baek, J., Kang, J. and Suh Park, K., 2004. Corporate governance and firm value: evidence from the
Korean financial crisis. Journal of Financial Economics, 71(2), pp.265-313.

Guidara, A. and Achek, I., 2015. Earnings announcement lag and non-mandatory disclosure impact
on the cost of debt: Hong Kong empirical evidence. Management Science Letters, 5(2), pp.223-234.

25