Do firm specific characteristics and industry classification corroborate voluntary disclosure of financial ratios: an empirical investigation of S&P CNX 500 companies

The study has examined the extent of voluntary disclosure of financial ratios in India and its association with performance of the company, size and industry classification. The companies selected for the study are CNX 500 companies. 25% of the sample companies (423) did not disclose any financial ratios voluntarily. Multiple correlation and regression were used to explore the relationship between disclosure index and the selected explanatory variables. The results indicate that the extent of voluntary disclosure of ratios is significantly influenced by size, RoI of the companies and industry classification thereby indicating that companies with larger market capitalization and better return on investments relatively disclose more ratios voluntarily. The infrastructure sector disclosed more ratios than companies from other sectors. The disclosure index was very low indicating that the companies were lacking in efforts to disclose more ratios voluntarily to various stakeholders for a better understanding and interpretation of financial statements. The sample companies disclosed 19% of the selected financial ratios in their annual reports. The paper also calls for mandatory reporting of select ratios and standardization of the methods used in calculation of financial ratios. Improved levels of voluntary disclosures will reduce information asymmetry among investors and enhance clarity about long-term business sustenance and strengthens governance norms. The paper also provides directions for future research.