Disclosure of reserves in the annual reports of Australian mining and petroleum firms

This article investigates why some firms in the extractive industries disclose mineral reserves in their annual reports and others do not. It uses an efficient contracting framework to propose that the firm's disclosure policies are likely to be driven by the constraints of contracts with claimants. Managers adopt the policies that minimize the cost of contracting with claimants. A firm's decision to disclose reserves in the annual report is likely to depend on its asset structure, debt financing, and the firm's monitoring process. The determinants of reserve disclosure are hypothesized to be the stage of the firm's growth, use of project financing, and the use of a quality auditor. Empirical tests indicate that, for the sample firms, the stage of growth and project financing are significant. Further, large firms are more likely to disclose reserves compared to their smaller counterparts.