The Journal of Developing Areas

ABSTRACT:

Disclosure of corporate information forms an integral part of the corporate governance framework and lies at the center of most of the corporate governance codes, principles and reports around the world given its indispensable contribution to market and firm performance. Unfortunately, corporate disclosure is not a central aspect of corporate governance in Tanzania. It is noted that the lack of adequate voluntary corporate disclosure is one of the biggest challenges facing the implementation of effective corporate governance in Tanzania. In turn, lack of sound corporate governance has fueled corruption and cronyism while suppressing sound and sustainable economic decisions. To address this major problem, this paper investigates the determinants of voluntary disclosure in 107 private Tanzanian mining and manufacturing firms. This study uses a longitudinal approach as variation across firms and over time. To this end, 2011–2015 is selected for the longitudinal analysis. Annual reports of 107 private firms was used to collect data in relation to ownership structures, financial performance and firm size. This data was analyzed using a random effects Generalized Least Squares (GLS) model with Mundlak (1978) corrections. Our results show that ownership structures are associated with voluntary disclosure. Specifically, ownership concentration is negatively associated with voluntary disclosure in mining companies while it is positively associated in manufacturing firms. Foreign ownership is positively associated with voluntary disclosure for both mining and manufacturing firms. Further, the results reveal that financial performance is associated with voluntary disclosure where leverage is positively related to voluntary disclosure in mining and manufacturing firms while liquidity is significantly associated with voluntary disclosure in mining companies only. Our results also show that mining companies disclose 3.2% more information than manufacturing firms. Relevant policies to promote voluntary disclosure should be directed at facilitating foreign direct investment and leverage. These policies include developing impartial court systems, development of infrastructure, provision of quality education, tax holidays and tax credit. It is recommended that loan guarantee provided by public financial institutions can be used to reduce risk. In addition, foreign exchange liquidity facilities can reduce risk associated with borrowing money in different currencies.