Drivers of mandatory disclosure in GCC region firms

This paper aims to investigate firm-level variations in the extent of mandatory disclosures and address the drivers of mandatory disclosure using data from the Gulf Co-operation Council (GCC) region. The extent of mandatory disclosure is examined using a disclosure index created with reference to 24 International Financial Reporting Standards (IFRSs). We find that the extent of mandatory disclosure required by applicable IFRSs/IASs increases with international presence, group firms, the level of voluntary disclosure, firm age, and the education level of company financial controllers. It decreases with firm size and the proportion of institutional share ownership. The degree of board independence is positively related to the level of mandatory disclosure in firms with no state ownership. Profitability positively affects the level of mandatory disclosure to a greater extent in more liquid GCC firms. Our results confirm that there is greater sensitivity of mandatory disclosure to loss than to profit. Loss increases, while profit decreases, the extent of mandatory disclosure. Our results promote further understanding of international financial reporting differences in an emerging country setting. Our findings provide a detailed insight to investors, financial analysts, practitioners, and academics. We develop a highly granular mandatory disclosure index in a developing country setting and identify key drivers of such disclosure.