Determinants of Corporate Governance Characteristics Influencing Price and Non-Price Informative Voluntary Disclosures: Evidence from Iran

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Gholamreza Zandi
Fauziah Md. Taib
Daing Nasir Ibrahim


Davani (2005) reported that one of the biggest problems facing the Iranian
investors is the poor quality of annual reports which preclude
comprehensive and effective analyses. Makhija and Patton (2004) also
found that institutional block holders lower the extent of voluntary disclosure
in the firms’ annual reports when they enjoy direct benefits of being in
control (DBC), therefore, the minority group is being expropriated. Since
the Iranian Commerce Code’s requirement on information disclosure for
public firms is limited to releasing only fundamental financial statements,
the amount of disclosure in the Iranian firms’ annual reports are largely
voluntary in nature. It is reported that the extent of information disclosure
is driven by the private motivation rather than satisfying the mandated
disclosure requirements. Therefore, this study intends to determine the
characteristics of corporate governance that influence the voluntary
disclosures in Iran in terms of their usefulness and effects on the share
prices as Price Informative Disclosures (PID) and their non-usefulness as
Non-Price Informative Disclosures (Non-PID). These characteristics may
help investors by presenting underlying economic substance of public firms
listed on the Tehran Stock Exchange as their true financial picture may be
unattainable. This study aims at depicting the Iranian stock market in
which low transparency comes with low level of public confidence that
results in the reluctant behaviour of investors from the private sector to buy
shares. The findings, in general, suggest that the listed firms provide the
market with a moderate amount of information which consists mainly of Non-PID matters. The lack of confidence among investors from the private
sector is due to low level of transparency and failure to present true financial


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