Association between corporate disclosure and information needs of company annual report users in Sri Lanka

This paper examines the extent of disclosures in company annual reports of Sri Lankan listed

companies and the user perceptions on the importance of information disclosed in company annual

reports. For this purpose, annul reports of 65 Sri Lankan listed companies were analysed using a

disclosure index. Furthermore, a questionnaire survey was conducted covering seven user groups to

examine the importance they attached to various information items disclosed in company annual

reports. The results of the study revealed a fairly high level of overall disclosure (69.8%) in Sri Lankan

company annual reports with 90 per cent of the sample companies disclosing 43 per cent of

information items examined by this study. It also showed that, in general, users have placed higher

importance on the items relating to financial status, including cash position; present and future earnings

including cash generation; and comparative status of the company. This study also identified an

apparent gap between the information needs of users and the information disclosed by companies as

some information items perceived by various users as important were not disclosed by any company or

disclosed by a few companies. Since the studies done in this area in emerging markets such as Sri

Lanka are limited, this study contributes to reducing the dearth of literature on corporate disclosure in

the emerging markets.