Norhani Aripin

Insights on the diversity of financial ratios communication

Purpose - This paper aims to examine the extent of financial ratio communication from an agency theory perspective. Design/methodology/approach - An empirical positivist approach is utilised to explore the predictors of disclosure within the 2007 annual reports of 300 Australian listed companies. Findings - Overall, the extent of financial ratio disclosures is very low (5.3 per cent) with more extensive disclosures within the sub-categories of share market measure, profitability and capital structure. A far lower liquidity and cash flow ratio information is reported. Larger firms with more dispersed share ownership provide more extensive financial ratio information than the others. Further, profit-making firms and Big4 clients exhibit more extensive financial ratio disclosures. Resources firms present significantly lower incidents of financial ratio than the financials and services sector. Corporate governance and capital management initiatives do not have predictive properties. Originality/value - Financial ratio disclosure, although important, is under-researched. A comprehensive set of predictors are investigated. The findings highlight the need for Australian regulators to consider more explicit guidelines or mandatory requirements.