Corporate performance modeling through disclosure quality at the level of developing countries in Southeast Asia

Abstract

The disclosure quality (DQ) of financial statements in Southeast Asian firms remains poorly understood, with its impact on performance yet to be empirically determined. Our study thus investigates the influence of DQ on corporate performance (CP) among listed firms, examining the moderating effects of managerial myopia (MM) and corporate governance (CG). Employing quantitative methods and data from Thomson Reuters DataStream, we analyze a ten-year dataset of firms listed on stock exchanges in six developing Southeast Asian nations during the period 2012–2021 using the generalized method of moments (GMM) estimation. Our findings support a positive effect of DQ on CP, consistent with agency theory, while also highlighting the moderating roles of MM and CG. We advocate for constraints on MM and strengthened CG mechanisms to enhance the effect of DQ on CP. Our study contributes new insights rooted in agency theory, providing comprehensive explanations for the effects of MM and CG on the DQ-CP nexus. Investors can leverage these insights by utilizing DQ and CG as forecasting indicators for future CP. Furthermore, future research could broaden the scope by including additional developing nations to yield more comprehensive findings.

Keywords:

• Corporate performance
• disclosure quality
• managerial myopia
• corporate governance
• developing countries
• GMM estimation method

JEL CLASSIFICATION CODE:

• F32
• F60
• G10
• G32
• H12

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 Asian Development Outlook (ADO) 2019 Update: Fostering Growth and Inclusion in Asia’s Cities | Asian Development Bank (adb.org).