Environmental Impact Inputs

resources. Therefore, organizations should move through the principle of scarcity of critical resources (Drees & Heugens, 2013) to ensure that the sources of resources it depends on are not thwarted by the management insensitivity to recognise the dangers of losing such resources. Critical resources are those the organization must have to function, for example, capital. In this case, the providers of capital and management are a critical aspect of the organisation.

Hillman, Withers and Collins (2009), Davis and Cobb (2010), Drees & Heugens (2013), Sharif & Yeoh (2014) discussed the importance of this theory in explaining the actions of organizations. Managers of organizations should understand that their successes are tied to owners who appointed them and they also provided the needed resources (capital) (Davis & Cobb, 2010). Managers' careers can only thrive if the owners‟ demands are met (Hillman et al., 2009).

Resource dependence theory has implications also regarding the suppliers of other resources like labour, raw materials, credits, and other financial instruments. Therefore, financial statements need to consider the interests of resource providers, if the organisation should continue to enjoy their support.

After wards further studies included Watts and Zimmerman (1990); Wallace and Naser (1995); Meek, Roberts and Gray (1995); Owusu- Ansah (1998); Street and Bryant (2000);

Wong (2001); Joshi and Ramadhan (2002); Naser and Nuseibeh (2003); Akhtaruddin (2005); Adeyemi (2006); Ofoegbu and Okoye (2006); Umoren (2009); Onafalujo, Eke and Akinlabi (2011);Okafor and Ogiedu (2011); and Baser (2012) to mention a few.

However, these studies concentrated on the disclosure practices of listed companies on the Stock Exchange. Few of them studied unlisted small scale enterprises like the study of Agyei-Mensah (2012) on rural banks in Ashanti region of Ghana. These studies covered a variety of areas of disclosure, such as effect of corporate attributes on extent of disclosure in listed companies, the comparability of deferent accounting bases financial reports and disclosure and the influence of firm characteristics on the quality of financial statements.

These studies were also concerned with transparency and disclosures; observance of accounting standards and codes in Nigeria; the relationship between firms characteristics and mandatory or voluntary disclosures. However, all these studies concentrated on the study of listed companies and to some extent unregistered companies in the countries affected (Agyei-Mensah, 2012).

The empirical review evaluated studies on corporate attributes as predictors of the extent of disclosures of accounting information of listed companies. The emphasis was on the extent of disclosures in corporate annual reports of listed public limited liability companies as represented by several constructs, such as adequacy, comprehensiveness, informative and timeliness of these disclosures. According to these studies, each of this construct suggests that the quality and extent of disclosure can be measured by an index representing the dependent variable (Adeyemi, 2006 and Umoren, 2009). The disclosure index is either weighted or un-weighted. Some indices are researcher-created and some are indices

developed by other studies and are adopted by other researchers to represent the dependent variables (Umoren, 2009). Chow and Wong-Boren (1987) provided some proofs that there are no significant differences between weighted and un-weighted disclosure indices. The study asserted that weights neither affect real economic consequences on the subjects whose opinions are pooled, nor do they reflect stable perceptions on similar information.

The information items forming the basis of the index of disclosure are either voluntary or mandatory. The mandatory disclosures are basically accounting standards, international or local (Umoren, 2009). On the other hand, the voluntary disclosures are concerned with disclosures that are not imposed by any accounting standards or law. The overall findings regarding the compliance level of companies and the relationship between the level of disclosure and various corporate attributes are mixed. Cerf in 1961 pioneered the study of the relationship between extent of corporate disclosure as dependent variable and company attributes as independent variables (Fremgen, 1964). The independent variables as identified in the study included profitability, asset size, method of trading shares, stock ownership, industry, frequency of external financing, stability of growth in earnings, dividends, product, degree of competition, and management as firms‟ characteristics that influenced the dependent variable of level of disclosure index.

The study used the variables to test the superiority of disclosure as measured by an index of disclosure. The index was constructed based on thirty one information items each weighted by importance. A percentage score was given to each company by dividing the number of points achieved by the total points possible for all items applicable to the company. The results indicated a positive relationship between disclosure and asset size, profitability and shareholder number. As for methods of trading shares, the study found that New York Stock Exchange companies were significantly superior to the stock Exchanges of other countries like China and

London. The study also discovered that there was lack of disclosure of some techniques such as depreciation, inventories, recognition of income of long term contracts and income tax allocation. There was also evidence that specific items required by shareholders were not adequately disclosed, such as sales breakdown, research and development (current and planned), capital expenditure (current and planned), information on management and their policies.

Cerf (1961) as cited in Ray (1962) provides us with useful findings especially as a seminal work that identifys these relationships. However, the study failed to test the significance of the relationship in statistical terms. It also did not consider some corporations such as foreign corporations, banks, finance houses, insurance companies, real estate companies, public utilities (Ray, 1962), commecialised government companies and investment companies. The inability of the study by Cerf (1961) to cover these other areas left a gap in literature for other studies to fill.

Singhvi and Desai (1971) acknowledged Cerf (1961)‟s work after ten (10) years of its existence as very fascinating. This was because it was the first of its kind to show the relationship between extent of disclosure and companies‟ attributes. To improve on Cerf's work, Singhvi and Desai (1971) examined additional variables such as earnings margin and influence of audit firms which were previously neglected by Cerf. To test the statistical significance of the relationship between the various variables, Singhvi and Desai (1971) evaluated the quality of information for fiscal years 1965 to 1966. Their sample included listed and unlisted corporations in the United States of America and used weighted index of disclosure method with 34 items similar to Cerf (1961).

The study assigned weights to the information items based on their relative importance as indicated by committee members on corporate disclosure and security analysts. The findings of the study were that there was a relationship between the index of disclosure and the specified

explanatory variables, which were asset size, number of shareholders, listing status, firms‟ rate of return and earnings margin. Using a multivariate linear regression, they estimated the coefficient of multiple determinations, which signified that variations in the quality of disclosure can be explained by the variables. When listing status was taken alone, it was seen that it explained partially, the variation in the quality of disclosures. Their results revealed that listing status was the primary explanatory variable. This was at variance with Cerf (1961) which portrayed asset size rather than listing status as the key explanatory variable. Singhvi and Desai (1971) concluded that corporations that disclose inadequate information were likely to be small in size, free from listing requirements, audited by small firms and less profitable.

Based on the conflicting results of Cerf (1961) and Singhvi and Desai (1971), Buzby in 1975 decided to probe further by examining the relationship between adequate disclosure and the two company characteristics of asset size and listing status. He constructed a disclosure index, based on information acquired from financial analysts, comprising 39 selected types of information appearing in the annual reports. He assigned Weights based on the analyst ranking in order to recognize differences in their relative importance. He used 88 companies in the sample with some listed on either the New York Stock Exchange (NYSE) or American Exchange (AMEX); while the others were unlisted. He tested for the listing status effect, and discovered that there was low level of statistical significance. The result of the test for the asset size effect revealed that the extent of disclosure was positive and significantly associated with asset size and not with listing status. This result was consistent with Cerf and not consistent with Singhvi and Desai (1971).

However, one of the limitations of Buzby (1975) study was that the measure of disclosure was based on only the information needs of financial analyst. Users of corporate

accounts were numerous as they are in modern days and to base a research on only one group of users (analysts) was not an adequate representation of the needs of all user groups.

Furthermore, McNally, Eng, and Hasseldine (1982) complemented and extended previous studies in the United States, such as Singhvi and Desai (1971) and Buzby (1975). The study examined the quality of disclosure with corporate characteristics in a different environmental setting, New Zealand. McNally et al. (1982) examined financial and non-retail listed companies with 54 voluntary items using size, rate of return, growth, audit firm and industry as their independent variables. They tested for rank order correlations for the first three company attributes and quality of disclosure. The only significant relationship found was between firm size and information quality. He also employed one-way-analysis of variance (ANOVA) (Kruskal Wallis) statistics to test industry group and audit size, but no significant influence was found between the two variables.

To extend the general knowledge of the overall extent of disclosure to Swedish listed companies, Cooke (1989) examined the annual reports of firms to assess whether there was a significant relationship between selected corporate attributes and the extent of disclosure. The differences between this study and the other prior studies were that, first, the study considered cross-border listed and unlisted firms, 71 (38 unlisted and 33 listed) on the Swedish Stock Exchange and 19 listed on both the Swedish and at least one foreign stock exchange during the year 1985. Second, the disclosure items were constructed based on the entirety of the annual reports, not just the financial statements. Third, the disclosure items were not directed at specific user groups, but over a wide range of approaches. In addition, the total number of items was 224, made up of financial statements, measurement and valuation methods, ratios, projections, financial history and social responsibility. They also constructed a scoring scheme to capture the level of disclosure by using a dichotomous procedure in which an item scores one if it disclosed

the item and zero if the item was not disclosed in the financial statements. When an item was not mentioned in the annual reports, it was assumed irrelevant and the company was not scored for that item. On the contrary, if it was apparent that the item was relevant, but not disclosed, such a company was scored zero. The method they used was unweighted based on the fact that each item was considered equally important. The index disclosure was the ratio of the actual score to the expected score. Descriptive statistics including Chi-square, Cramer's V, Contingency coefficient, lambda coefficient and one-way analysis of variance (ANOVA) was used in analyzing the data and it was discovered that there was a high degree of association between the listing status and disclosure indices of the firms.

In order to identify which independent variables that influenced the extent of disclosure, Cooke (1989) adopted multiple regression procedure to analyse selected independent variables such as quotation status, parent company relationship, annual sales, total assets, and number of shareholders. He found that listing status and firm size were major explanatory variables for voluntary disclosures. In addition, the firms categorized as trading disclosed less voluntary information than other industries. Also, multiple listed companies disclosed more information than domestically listed companies.

Several other studies examined the relationship between company characteristics and extent of disclosure in many countries‟ financial reporting on the premise that findings of one country may not be applicable to the unique culture and business environment of other countries. These included both in developed and developing countries. For example Cooke (1989) and Cooke (1992) for Japanese; Wallace, Naser and Mora (1994) investigated the impact of firm characteristics on disclosure in annual reports and accounts of Spanish firms for the year 1991; Chau and Gray (2002) used a linear multiple regression to study the association between ownership structure and extent of voluntary disclosures in two Asian Countries of Hong Kong

and Singapore; the German companies were investigated by Glaum and Street (2003) as to the level of German companies compliance with both the International Accounting Standards and United States Generally Accepted Accounting Principles (GAAP). In yet another study the New Zealand companies were examined by Owusu-Ansah and Yeao (2005) for the effect of the Financial Reporting Act of 1993 (FRA) on mandatory disclosure practices of companies listed on the New Zealand Exchange Limited. Latridis (2008) examined the disclosure of accounting information in the financial statements of UK firms. Mexican corporations were examined by Chow and Wong-Boren (1987) for the understanding of accounting reporting practices in non-Anglo- American nation and secondly to provide additional evidence on the factors attributable to voluntary financial disclosures. In India, Ahmed (2005) investigated the extent of voluntary reporting practices of listed non-financial companies with 12 disclosure items of companies relating to the extent of voluntary reporting practices to industry type.

In developing countries, studies on mandatory and voluntary disclosure practices were also conducted, like in Zimbabwe, Owusu-Ansah (1998) and Chamisa (2000) empirically investigated the degree of influence of eight (8) corporate attributes on the extent of mandatory disclosure and reporting of listed companies. After the Saudi authorities introduced a number of reforms in order to transform the economy in the late 1990s to 200, Naser and Nuseibeh (2003) assessed the quality of information disclosed by non-financial companies listed on the Saudi Stock Exchange by examining the extent to which Saudi firms comply with stated accounting measurement and disclosures. In Egypt, a detail analysis of disclosures in financial statements of listed companies on the Egyptian Stock Exchange was conducted by Dahawy and Conover (2007) with the results that not all the companies comply fully with the international accounting standard. The compliance rate was an average level of 62%. All these studies had varying

degrees of results relating to the relationship between characteristics of firms and extent of mandatory or voluntary disclosures.

The Nigerian financial reporting environment was empirically investigated by Umoren (2009), Adeyemi (2006), Ofoegbu and Okoye (2006), Okike (2000), and Wallace (1988).

Wallace‟s (1988) study was one of the pioneer studies on the Nigerian corporate reporting environment relating to companies listed on the Nigerian Stock Exchange. He investigated the extent of disclosure using statutory and voluntary items similar to the studies of Buzby (1975), Baltet (1975), McNally et al. (1982) and Chow and Wong-Boren (1987). Wallace's choice of information items was relevant to the user group accountants, top civil servants, managers, investors and other professionals. He used a sample of 47 companies, being 54% of the total population of listed firms quoted on the Nigerian Stock Exchange during 1982 and 1986. The study defined disclosure as a dichotomous item “1” for an item disclosed and “0” for the item not disclosed and the scoring system was informed by its intensity. He constructed two types of disclosure indices, unweighted and weighted. The weighted disclosure index reflects the preferences of the six-user groups. The result of the analysis revealed that companies which publish annual reports did not adequately comply with the disclosure requirements of accounting standards. The overall disclosure index revealed that there was a clear case of weakness in the disclosure practices of listed firms in Nigeria.

The study of Okike (2000) on the corporate reporting practices showed that the accounting standards disclosure practices in Nigeria was weak and accounting reports were deficient in the sense that they lacked vital information. Ofoegbu and Okoye (2006) investigated the extent to which listed companies in Nigeria complied with the Statements of Accounting standards (SAS). Using a sample of seven local accounting standards (SAS 3, SAS 7, SAS 8, SAS 10, SAS 11, SAS 18 and SAS 19) the study analysed the annual reports of 41 companies

publicly quoted at the Nigerian Stock Exchange. The result showed a mixed and weak rate of compliance with disclosure requirements. For example, full compliance was recorded for items such as: bases of determining book value of assets, cash flow presentations, and disclosure of various forms of taxes, movements of taxes and assets during the year. Partial compliance was recorded for items such as frequency of revaluation policy, amount of foreign exchange gain or loss, maturity profile of risk asset of banks, and commission paid/received (Ofoegbu & Okoye, 2006). In the same year, Adeyemi (2006) also investigated the impact of accounting standards on financial reporting of listed companies in Nigeria. The study employs the correlation and multiple regression techniques to analyze the data and means and standard deviations obtained from primary data were also used for comparisons. Specifically, Krustal-Wallis statistics was used to test for differences in perception of independent samples and Mann Whitney-U test was employed for testing differences between means of scores. Data analyses were done using statistical package for social science (SPSS Release 10). The results of the study showed that many of the SASs relied upon by the financial statements preparers in Nigeria have been outdated in relation to their IASs/IFRS equivalents. The overall findings of the study showed that the extent of compliance with SASs, IASs and IFRSs was low. A significant difference between the findings of this study and those of other studies was that the type of news and size of auditing firm showed a negative relationship in the Nigerian situation as against those of other countries, for example Germany and Spain. This result was an indication that in the Nigerian situation, when good news was to be conveyed, the company might be economical with the details as demanded by the SAS.

Umoren (2009) evaluated accounting disclosures and corporate attributes in Nigerian listed companies. The study used positive accounting theory to investigate corporate disclosure practices based on seven company-attributes- company size, profitability, leverage,

multi-nationality, auditor size, industry type and company age. It employs contents analysis of disclosure levels for financial and non-financial companies. The overall results showed that both listed financial companies and listed non-financial companies do not fully comply with disclosure requirements of relevant SASs. In addition, the study result showed that company size and auditor type were the only corporate attributes that significantly related to extent of disclosure.

The revelations of the results of prior studies of listed companies in many countries and especially in Nigeria explained the importance of under-taking similar research in Nigeria but with a focus on the Commercialized Federal Government Enterprises which have not been examined by any prior research. In addition, prior research concentrated on the relationship between firm characteristics and extent of disclosure. This approach assumes that the natures of the enterprises (which are the special features of the enterprises) are not significantly relevant to their disclosure practices. This research argued that the special features (firm effects) of the enterprises also significantly affect the extent to which they comply with accounting standards disclosure requirements.