Impact of Disclosure Practices on Investment Decision

Abstract

This study aims to investigate the impact of different parts of the disclosure index on concerned components of investors’ decisions. For this consideration, this study has constructed an unweighted disclosure index under eight headings: corporate profile items, corporate governance items, employees and social responsibility items, risk management items, indicators of financial performance, income statement items, balance sheet items, and accounting policy items. The individual disclosure of each part of the disclosure index has been calculated. This study also identified some concerning components of investors' decisions like current ratio, working capital ratio, deposit assets ratio, cash deposit ratio, return on equity, return on assets, dividend yield ratio, and dividend payout ratio. To achieve the study objective, this study has used secondary data extracted from published audited annual reports of ten sample banks in Bangladesh from 2015 to 2019. The ANOVA test and multiple regression analysis with the ordinary least square model (OLS) have been employed to reveal the study findings. The results of the ANOVA test report significant variation in the disclosure scores of different parts of the disclosure index and the various concerned components of investors’ decisions. The results of multiple regression analysis illustrated that the disclosure scores of the other parts of the disclosure index had a significant positive impact on the different concerned components of investors’ decisions.