Determinants of voluntary disclosure of sales in small private companies

This paper examines the influence of industry-specific characteristics on the decision of small Belgian companies to withhold or voluntarily disclose financially sensitive information. Empirically testing hypotheses on voluntary disclosure by small private companies is very difficult because of the absence of capital market incentives and lack of settings in which financial disclosures are voluntary. Small companies in Belgium have to publish and file abbreviated financial statements, by which they have the option to withhold sales and cost of sales. This paper uses the population of Belgian SMEs (294,370 companies) to determine whether industry-specific characteristics have an impact on the decision to disclose annual sales. The results of the logistic regression showed that the type of industry and the industry concentration (based on the average number of employees) have an impact on the disclosure decision of small private companies. The contribution of this paper is twofold. First, it addresses a gap in the literature on voluntary disclosure by focusing on small private companies in a Continental European environment, whereas the majority of the previous studies relates to large listed companies. Second, we provide empirical evidence on the effect of industry variables on the disclosure decision. To date, research on industry variables remain rather scant and are often contradictory.