Ownership Concentration and Corporate Disclosure in Bangladesh

This paper shows that non-compliance with the mandatory disclosure requirements is pervasive in Bangladesh. This is contrasted with the observation that audit opinion is often unqualified. Given that accounting standards and disclosure rules are weakly enforceable, corporate disclosure practice is de facto discretionary in the country. The present study thus investigates cross-sectional determinants of financial disclosure in corporate annual reports. The findings show that, controlling for factors such as age, size, profitability and financial leverage, disclosure effect of ownership concentration is negative. The findings validate the view of La Porta et al. (1999) that an increasing ownership concentration leads corporate management to adopt a disclosure regime which is biased against the external shareholders and creditors. The findings imply an information problem whereby insiders will likely expropriate outside shareholders in an environment where legal protection of the latter is weak