Spontaneous Harmonization Effects of Culture and Market Forces on Accounting Disclosures Practices

Abstract

This empirical study of 256 companies from seven countries examines whether cultural and market forces correlate with the level of annual report disclosures, from the perspective of investors. The primary findings show that the secretiveness of a culture does underlie disclosure practices of its business enterprises. The market forces that significantly influence more disclosures are higher levels of foreign sales, lower debt ratios, and larger total assets. Secondary findings show that local enterprises, but not international enterprises, disclose financial information commensurate with the secretiveness of their home culture. Enterprises operating in the global culture, on the other hand, appear to be disclosing higher levels of information than dictated by their local culture, perhaps in order to obtain resources at reasonable costs. These findings may be useful to the International Organization of Securities Commissions in their effort to harmonize financial reporting of companies listing on foreign stock exchanges.

JEL Classification: M40, F30