An Evaluation of Comprehensiveness of Corporate Reporting Practices in a Developing Country: Empirical Evidence From Listed and Non-Listed Libyan Companies

The quality and quantity of information disclosed by companies in their annual reports in a particular country depends heavily on the country’s level of economic development, the development of the accounting profession, the legislation in force, and the existence of a sophisticated financial market. In this vein, following the recent changes and reforms of both the Libyan economy and the legislation around financial reporting, government legislation and laws have played a major role in shaping the current financial reporting practices in Libya. This thesis aims to empirically examine the quality as well as the quantity of the information disclosed in the annual reports of Libyan companies. In particular, by using an integrated research design framework, the study seeks to: (i) assess the perceptions of the preparers and users of Libyan Corporate Annual Reports (CARs) regarding the use and usefulness of the information disclosed; and (ii) investigate the comprehensiveness of disclosure among Libyan listed and non-listed firms, and examine the association between a number of corporate governance mechanisms, the ownership structure, and corporate specific characteristics and the corporate disclosure behavior of Libyan listed and non-listed firms. This study consists of two stages. The first stage uses a questionnaire survey as a research instrument. The second stage uses a content analysis of real secondary data collected from companies’ annual reports and analyzed using various regression models.
The findings of the questionnaire survey suggest that both preparers and users consider CARs to be the most important source of corporate information for their decision-making process.
Furthermore, the delay in publishing CARs and the lack of unified accounting and reporting standards were viewed as the prime factors restricting their use in Libya. Generally speaking, the respondents considered the information disclosed in the annual reports of Libyan firms as adequate.
With regard to the factors affecting corporate reporting practices in Libya, as expected, the Libyan Commercial Code (LCC) and Income Tax Law (ITL) were viewed by the vast majority of respondents as the prime factors affecting corporate reporting practices in Libya. In addition, a lack of reporting standards and accepted accounting principles, in line with the lack of knowledge of external users’ needs were perceived as the prime obstacles restricting the extent of disclosure. The findings also indicated that there were statistically significant differences in perceptions among the user groups, and between users and preparers regarding the use and usefulness of CARs in Libya.
With regard to the findings of the content analysis of the annual reports of Libyan listed and non-listed companies, the results suggest that, firstly, board size, the frequency of board meetings and the presence of an audit committee have an impact on the level of corporate disclosure. On the other hand, the findings indicate that duality in the position of the CEO and board composition are not related to the extent of disclosure. Secondly, regarding ownership structure variables, no evidence was found that director ownership, foreign ownership, government ownership and institutional ownership were significant in explaining the extent of disclosure. Finally, the results from the content analysis are robust, controlling for a number of potential endogeneity and non-linearity issues.