The incentives for voluntary discosure of borrowing costs in annual reports

Lee, Huey Yee. (1998). The incentives for voluntary discosure of borrowing costs in annual reports Honours Thesis, Department of Commerce, The University of Queensland.

       
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Author Lee, Huey Yee.
Thesis Title The incentives for voluntary discosure of borrowing costs in annual reports
School, Centre or Institute Department of Commerce
Institution The University of Queensland
Publication date 1998
Thesis type Honours Thesis
Total pages 74
Language eng
Subjects 15 Commerce, Management, Tourism and Services
Formatted abstract Voluntary disclosures represent free choice on the part of management to provide information deemed relevant to the decision needs of stakeholders. This research examines the voluntary disclosure of borrowing costs by Australian and New Zealand firms. Costs of disclosing such information include political costs, litigation costs, and proprietary costs. Management's incentives to disclose include lobbying governments for political action, providing excuses for low profitability, and obtaining external financing on more favorable terms. These incentives are likely to be stronger during high interest rate periods. Obviously, firms will disclose only when the benefits of disclosing exceed the costs.

The annual reports of 56 firms were examined in 1989 (high interest rates) and in 1996 (low interest rates). Statistical analyses provided some weak support for the assertions that firms are more likely to voluntarily disclose borrowing cost information in high interest rate periods, when they are paying higher interest rates than other firms, and when they are seeking external financing. The statistical analyses revealed stronger support for the hypotheses that less profitable firms and more highly leveraged firms were more likely to voluntarily disclose borrowing costs.

The results of this research are useful to management, stakeholders, and policymaking bodies. This study can help management make better decisions about when to voluntarily disclose borrowing costs. Stakeholders can use the results to help them better understand firms' motivations to withhold or voluntarily disclose specific accounting information. Policy-making bodies can use this research when deciding future disclosure requirements.

 
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Created: Tue, 19 Oct 2010, 17:20:52 EST by Muhammad Noman Ali on behalf of Social Sciences and Humanities Library Service