Degree Name

Doctor of Philosophy


School of Accounting and Finance


Improvement of corporate disclosures is very important for the development a country's stock market as it provides a greater degree of transparency for interested parties such as shareholders, creditors, and more importantly for new investors. Although there have been a large number of studies on corporate disclosure practices in developed markets, prior research on this aspect in emerging markets is sparse.

One of the major reasons for the dearth of literature in emerging markets is the lack of understanding of the importance of corporate disclosure, which is due mainly to the relatively low level of development in their stocks markets, coupled with the low investor interest in share investments. However, industrial and commercial activities in many of these emerging markets have expanded dramatically in recent years, creating an increased demand for more timely and extensive financial information by a wider spectrum of external users. In particular, many of the share markets in these countries have shown a sizeable increase in their transactions in terms of value and numbers. With these developments, there is now a growing demand for prompt and adequate disclosure of information required for the purpose of facilitating economic decision making of various users. On the other hand, despite the growing attention and importance given to disclosure of material information, it is a common feature in most stock markets that there is very limited compliance with disclosure requirements. Therefore, in order to help improving corporate accounting disclosures in these markets, it is imperative that the status quo of disclosure practices be identified clearly before taking necessary actions for further improvements.

The major objective of this study is to examine the current state of corporate disclosure practices in one of the emerging markets, Sri Lanka. This objective was achieved through an analysis of a questionnaire survey of seven user groups of corporate annual reports and an analysis on 65 corporate annual reports in Sri Lanka through three disclosure indexes namely, mandatory, voluntary, and overall. The results of the study found that various users of corporate annual reports in Sri Lanka use them mainly to obtain information for the purpose of buying, holding or selling company shares. Moreover, these users have viewed annual reports as the prime source of information although information provided in these reports is perceived to be inadequate. The examination of the importance attached to various sections of the annual report revealed that both the balance sheet and the profit and loss statement are perceived by the overwhelming majority of users as the most important sections of an annual report. It was also found that the majority of respondents have used annual reports frequently, indicating the important role it plays in their decision making process. As for the factors limiting the use of annual reports in Sri Lanka, the respondents identified the publication delay as the major obstacle. The majority of users held the view that the existing time lag could be reduced substantially. Overall, despite the inadequacy of information provided, corporate annual reports were recognised as a very useful tool for decision making by most of the users in Sri Lanka.

The analysis of annual reports showed a fairly high level of overall disclosure by companies, especially when compared with the disclosure levels of other emerging markets. Also, the age and size of companies in Sri Lanka was found to have a positive association with high disclosure, suggesting that old and large companies disclose more information than vice versa. While a relatively high degree of compliance with mandatory disclosure requirements was observed, the voluntary disclosure was considerably low across all sectors. The differences of disclosure were also observed between companies in all sectors with the motors sector showing the highest level of disclosure and the land and property sector recording the lowest. Finally, it was found that although the overall disclosure level of Sri Lankan companies was comparatively high, the information disclosed in their annual reports has not been adequate both in quality and quantity to satisfy the information needs of annual report users in Sri Lanka.