Critical Perspectives on Accounting 20 (2009) 635–650

An analysis of the companies’ compliance with

the EU disclosure requirements and corporate
characteristics influencing it:
A case study of Turkey
Turgut Çürük
University of Cukurova, Adana, Turkey

Received 19 March 2006; received in revised form 14 February 2007; accepted 11 May 2007

Abstract

One of the factors shaping accounting disclosure of countries in Europe is the EU Fourth Directive
(EUFD) which addresses individual company accounts. The EUFD has been claimed to have had an
impact on accounting, including accounting disclosure, of not only the EU countries but also non-EU
member European countries. Turkey is one of the non-EU member European countries claimed to be
influenced by the EUFD and this study examined Turkish companies’ level of compliance with the
disclosure requirements of the EUFD over the years (1986, 1987, 1991, 1992 and 1995), and assessed
whether companies’ level of compliance had been influenced by their corporate characteristics, such
as company size, listing status and industry type.
Turkish companies’ level of compliance with the disclosure requirements of the EUFD was mea-
sured by an index (i.e. EUFD Disclosure Compliance Index—EUFDCDI). The index was developed
by; constructing disclosure scoring sheet; obtaining annual reports of 61 sampled Turkish companies
over the years; completing scoring sheet for each companies’ annual report; and creating disclosure
index. The index (EUFDCDI) scores was, than, analysed for each year to assess the companies’
compliance with the EU disclosure requirements and both parametric and non-parametric test, were
conducted to determine if there were significant changes in the extent of disclosure in compliance with
the EUFD over the years. Furthermore, using the companies EUFDCDI score as dependent variable
and corporate characteristics as independent variables, the Ordinary Least Square regression was run
for each year to find out if the companies’ level of compliance with the EU disclosure requirements
were influenced by their corporate characteristics.

E-mail address: tcuruk@hotmail.com.

1045-2354/$ – see front matter © 2008 Elsevier Ltd. All rights reserved.
doi:10.1016/j.cpa.2007.05.003
636 T. Çürük / Critical Perspectives on Accounting 20 (2009) 635–650

The results of this study revealed that Turkish companies’ compliance with the required disclosure
by the EUFD varied within the range of 30–85%, but their compliance increased significantly from
one year to another throughout the selected period. The results further revealed that listing status is
one of the important corporate characteristics of the Turkish companies affecting their compliance
with the EU disclosure requirements.
© 2008 Elsevier Ltd. All rights reserved.

Keywords: Turkish companies; Disclosure; EU Directive; Compliance; Ordinary Least Square

1. Introduction

Past studies have recognised that accounting disclosure requirements and practices do
not develop in a vacuum but are shaped by a number of influences (see, for example,
Adhikari and Tondkar, 1992; Choi and Mueller, 1992). Looking at disclosure from the
macro perspective, environment determinism theory (EDT) suggests that both internal and
external (or international) environmental factors are important factors affecting accounting
disclosure in a country.
Despite the view that the accounting system in a country should be country-specific,
i.e. should reflect environmental factors inherent in the country (Briston, 1978), there is
evidence in the EDT based literature which suggests that accounting, including disclosure,
in developing countries is likely to be influenced more by external factors (see, for example,
Cooke and Wallace, 1990).
International harmonisation efforts are amongst the suggested important external envi-
ronmental factors. One of the primary generators of such efforts is the European Union (EU).
Accounting directives issued by the EU, particularly the EU Fourth Directive (EUFD), have
been claimed to have had an impact not only on the EU member countries, but also on non-
EU member European countries (see for example Tay, 1989; Van Hulle, 1992; Alexander
and Archer, 1992). Suggested reasons for the influence of EU directives on non-EU member
European countries include such countries’ desire to join the EU and their close economic
and trade relationship with the EU.
On the basis of the above arguments, it may be possible to hypothesise that harmonisation
efforts by the EU are amongst the important external environmental factors that are likely
to have had an influence on accounting, including disclosure requirements and practices,
in a country like Turkey: a non-EU member European country which is a candidate to
join the EU and has a close economic and trade relationship with EU member countries.
Indeed, recent study by Çürük (2001a) indicated that accounting disclosure requirements
and practices of Turkey was influenced by the EU requirements, particularly the Fourth
Directives.
If the EU requirements have had an impact on the accounting disclosure practices in
Turkey, one should observe that Turkish companies must have been complying with the
EU disclosure requirements, particularly there must, at least, have been moves by Turkish
companies towards compliance with the EU disclosure requirements over the years. As the-
oretical arguments based on disclosure theories, (i.e. Agency Theory and Political Process
Theory) suggest and empirical studies in the literature indicate that companies’ extend of
 T. Çürük / Critical Perspectives on Accounting 20 (2009) 635–650 637

disclosure may vary on the basis of their corporate characteristics, it may also be possible
that the Turkish companies’ compliance with the EU disclosure requirements have been
influenced by their corporate characteristics.
This study, therefore, examines Turkish companies’ extent of disclosure in compliance
with the EU requirements over a period to find out:
1. whether companies had been complying with and there had been moves towards com-
pliance with the EU disclosure requirements over the years;
2. whether the companies’ level of compliance with the EU disclosure requirements had
been influenced by their corporate characteristics, such as company size, listing status
and industry type.
Theoretical arguments and review of literature related with the main concerns of the
study are presented below. Research methodology employed in this study together with the
analysis of research data and conclusion drown are provided in the following sections.

2. Theoretical arguments and literature review

Factors such as the development of international business on a global scale and inter-
nalisation of the capital markets are exerting pressure on countries for the adoption of a
more international accounting perspective. According to Adhikari and Tondkar (1992, p.
76) “nowhere is this trend more manifest than in the effort currently underway to harmonise
accounting disclosure and reporting regulation”.
Particularly over the last three decades, much effort has been devoted to harmonise
corporate financial reporting on a regional and international level. One of the primary
generators of international accounting harmonisation efforts within Europe has been the
EU (Roberts et al., 1996).
The EU, which has been described as “the most powerful source of change towards
harmonisation among leading countries in world accounting” (Nobes and Parker, 1995, p.
140), has been active in achieving regional harmonisation of accounting principles through
a series of directives. The Fourth and Seventh Directives have been considered as the most
important EU directives affecting accounting in Europe (see Roberts et al., 1996).
As the EU member states are obliged to transpose the provisions of the directives into
national laws and the Fourth and Seventh Directives have already been implemented in the
national laws of all member states (Hopwood, 1994), these directives have had an impact
on, to a certain extent, accounting and financial reporting in member states. Addressing the
impact of the Fourth Directive, Tay (1989, p. 206) noted that “given the diversity of finan-
cial reporting practice in the EC member states, different aspects of the requirements of the
Directive have affected financial reporting in Member States in different ways”. According
to Alexander and Archer (1992, p. 140) “the achievements of the Fourth and Seventh Direc-
tives within the EC have been real, but more successful at the presentation level than at the
content, valuation and attitudinal level”. However, a review of some of the empirical studies
that attempted to assess the impact of the FD on the ‘harmonisation of accounting standards
and practices’ in the Europe (see, Surveys by Federation des Experts Comptables Europeens
(FEE) 1989 and 1991; Tay, 1989; Emenyonu and Gray, 1992; Walton, 1992; Herrmann and
638 T. Çürük / Critical Perspectives on Accounting 20 (2009) 635–650

Thomas, 1995) do not provide conclusive evidence regarding the effectiveness of the FD.
The FEE’s (1989) survey, which indicated a fairly high level of harmonisation in those areas
covered by the FD within the EU after the FD was implemented, and the study by Walton
who found a lack of harmonisation in the application of the FD between and within the two
EU member states, exemplify the extremes of the mixed results of the reviewed studies on
harmonisation in the EU.
Even though EU harmonisation is of major concern for member countries, there are
arguments that the EU directives, particularly the Fourth Directive, also have had/will have
an impact on the accounting regulations and practices of non-EU member European coun-
tries. A number of explanations are proffered as to why and how. First, as pointed out
by Tay (1989, p. 215) “the discussion among member states over alternative methods of
financial reporting, and the solutions chosen and formulated in the adopted directive, will
influence the thinking of legislators in other countries”. The second explanation is related
to the non-EU member European countries’ close trade and economic relationship with the
EU. In this respect Tay (1989, p. 215) noted that “the community trades with its European
neighbours and invests in their companies, so that eventual harmonisation with them will
be as logical as harmonisation within the Community, for the same reasons”. Switzerland
is one of the non-EU member European countries that has had a close economic and trade
relationship with the EU. Raffournier (1995), who reviewed accounting and its environment
in Switzerland, pointed out that:
“Switzerland . . . largely dependent on the EU because 72% of its imports and 58% of
its exports are with the EU member states. In the field of accounting, a consequence
of this influence is that more and more companies draw up their financial statements
in accordance with the Fourth and Seventh Directives” (p. 1250).
Similarly, Adams and McMillan (1997), who examined accounting in Poland, claimed
that there has been a direct influence of the EU directives on the post-communist accounting
regulations, demonstrating the influence of political and economic ties.
Another explanation put forward by Wallace (1990, p. 7) is “the ‘bandwagon effect’: this
refers to those countries that have no historical and economic reason to be led, but decide
to follow the lead of a group of countries”.1
The fourth, and probably the most important, explanation is the non-EU member
European countries’ desire and attempt to join the EU and accordingly such countries’
“preparation for eventual membership of the EU” (Nobes and Parker, 1995, p. 137). Accord-
ing to Alexander and Archer (1992, preface), “European countries outside the EC and hoping
to join it or to enjoy a number of benefits of membership are already aligning changes in
their accounting rules with the EC requirements”. One of the most important signs that sup-
ports this argument is the existence of indications regarding the impact of the EU directives,
particularly the FD, on accounting in EU member states prior to their accession to the EU
(see for example Tay, 1989; Lukas, 1992; Nasi, 1992).
For instance, according to Tay (1989, p. 215) Spain and Portugal “had taken into account
the provisions of the Directive [FD] when updating their accounting rules, prior to their

1 Wallace (1990, p. 7) argues that “one such effect is the possibility of the 4th and 7th Directives influencing a

change in the financial reporting of non-EEC countries in Europe”.

 T. Çürük / Critical Perspectives on Accounting 20 (2009) 635–650 639

accession to the EU”. Similarly, among the three relatively new members of the EU, Austria
in 1990 (long before it became a member of the EU) enacted an accounting regulation
(Rechnungslegungsgesetz) which conforms in principle to EU Directives (Lukas, 1992);
and Finland in its accounting reform in 1990 also took into account the EU’s Fourth and
Seventh Directives (Nasi, 1992). In a pilot study, Boross et al. (1995) found the move to
EU membership to be the second most important factor to have influenced the shaping of
the new Accounting Law in Hungary, enacted in 1991. Regarding the Polish case, there
are also arguments that accountancy law enacted in Poland in 1990s was modelled on the
EU directive, due mainly to the Polish government’s desire to join the EU (see, Adams and
McMillan, 1997). On the other hand, FEE (1991) survey provided an overall indication
regarding the influence of the FD on accounting practices in the new EU Member States
prior to their accession to the EU (i.e. Finland and Sweden) as well as non-EU European
countries (i.e. Norway and Switzerland).
Another non-EU European country that has been an associate member of the EU since
1963 and the first non-EU member European country that applied to join the EU as a
full member is Turkey. Turkey’s recent effort to bring her regulations in line with the EU
and EU’s approach to give Turkey a deadline to start the negotiation for full membership of
Turkey do provide strong indication as regards to Turkey’s desire to became a member of the
EU. On the other hand, there are same indications which suggest that Turkey is attempting to
bring her regulation, including those related with financial reporting and disclosure (Çürük,
2001a) and their application in line with the EU.
On the basis of the above provided theoretical arguments and results of the literature
review, it may be possible to hypothesise that harmonisation efforts by the EU could
be one of the important external environmental factors influencing accounting, includ-
ing accounting disclosure, in Turkey. If the EU requirements have had an impact on the
accounting disclosure practices in Turkey, one should observe that Turkish companies’
must have been complying with the EU disclosure requirements, particularly there must, at
least, have been moves by Turkish companies towards compliance with the EU disclosure
requirements over the years. One of the main concerns of this study, therefore, is to assess
Turkish companies’ level of compliance with the disclosure requirements of the EU over the
years.
On the other hand, theoretical arguments based on disclosure theories, (i.e. Agency The-
ory and Political Process Theory) suggest that companies’ extend of disclosure may vary on
the basis of their corporate characteristics (see, Haniffa, 1998; Çürük, 2001b). Indeed the
results of empirical studies do suggest that certain corporate characteristics of the compa-
nies, i.e. size (see, Singhvi and Desai, 1971; Cooke, 1989a; Wallace et al., 1994; Al-Mulhem,
1997; Giner, 1997), listing status (see Singhvi and Desai, 1971; Cooke, 1989a; Wallace et
al., 1994; Al-Mulhem, 1997; Giner, 1997), and industry (see Stanga, 1976; Cooke, 1989a,
1992; Wallace and Naser, 1995; Al-Modahki, 1996; Al-Mulhem, 1997), are among the
important corporate characteristic of the companies influencing the extend of information
disclosed by companies in various countries. So much in line with results of the above men-
tioned studies, the results of longitudinal study on Turkish companies by Çürük (2001a)
also revealed that size, listing status and industry types were important corporate charac-
teristics affecting the extend of accounting information disclosed by Turkish companies in
their annual reports. It may, therefore, be possible that the Turkish companies’ extend of
640 T. Çürük / Critical Perspectives on Accounting 20 (2009) 635–650

disclosure in compliance with the EU disclosure requirements have been influenced by their
corporate characteristics. The other main concern of this study, therefore, is to assess whether
Turkish companies’ level of compliance with the EU disclosure requirements had been influ-
enced by their corporate characteristics, such as company size, listing status and industry
type.

3. Research methodology

An examination of companies’ compliance with the EU disclosure requirements over

the years and assessment of the impact of the companies’ corporate characteristics on their
level of compliance, required measurement of Turkish companies’ extend of disclosure in
compliance with the EU requirements over the years.

3.1. Measurement of the extent of disclosure

According to Cooke and Wallace (1989, p. 51), disclosure is an abstract concept that
cannot be measured directly. It does not possess inherent specifications by which one cannot
indicate its intensity or quality, like the capacity of a car. Nevertheless, they argued that a
suitable proxy such as an index of disclosure can be used to determine the extent of infor-
mation disclosed by a firm. Indeed, the disclosure index has been widely used by previous
researchers to measure the extent of disclosure in company accounts. This study also used
disclosure index to measure the Turkish companies’ extent of disclosure in compliance with
the EU requirements. The procedure followed to measure the extent of disclosure (i.e. to
create disclosure index) is summarised as follows:

1. Construction of a disclosure-scoring sheet.

2. Scoring the disclosure items.
3. Creation of disclosure index.

3.1.1. Construction of disclosure scoring sheet

The first step in the development of a disclosure index to measure the extent of disclosure
is the selection of items to be included on a disclosure scoring sheet. Since there has been
no general theory regarding the number and selection of the items, previous studies have
used between 17 (Barret, 1976) to 289 (Spero, 1979) items. The scope of the selection of
information items usually depends on the focus of the study.
As this study concerns with the measurement of the companies’ extend of disclosure
in compliance with the EU requirements, disclosure-scoring sheet was constructed on the
basis of a review of the text of the Fourth Directive of the EU (EUFD). The scope of this
study is limited to the EUFD which addresses individual company accounts rather than
the EU Seventh Directive, that address consolidated financial statements, as preparation of
consolidated accounts is not common practice in Turkey. The list of the disclosure-scoring
sheet, which was developed by this researcher and its accuracy was checked by two British
Academicians, covers 129 required disclosure items by the EUFD.
 T. Çürük / Critical Perspectives on Accounting 20 (2009) 635–650 641

3.1.2. Scoring the disclosure items

There are different approaches for developing a scoring scheme to capture levels of
disclosure. The most commonly used approach (see, for example, Cooke, 1989b; Soh,
1996; Al-Modahki, 1996; Haniffa, 1998) is a modified dichotomous procedure, in which
an item scores one if it is disclosed, zero if it is not disclosed, and NA if it is not applicable.
A similar approach was also adopted in this study, that is, the contents of a company’s
annual report are checked against the items on the scoring sheet and coded as one (for
disclosed) zero (for not disclosed) and NA (for not applicable) depending on whether the
report contained the item of information which is relevant to the particular company. To
overcome the problem of incorrectly penalising the company for not disclosing an item that
is not applicable, the content of the whole annual report was read before a decision was
made.
Having scored the disclosure sheet, for each company in the sample for each year, a
disclosure index (DI) was created to measure the extent of disclosure.

3.1.3. A disclosure index

Disclosure index (di) is a ratio computed by dividing the total actual score awarded to
a company by the total maximum score that particular company is expected to earn. The
disclosure score (DS) is additive:
m

DS = di
i=1

Where di = 1 if the item in the scoring sheet is disclosed 0 if the item in the scoring sheet is
not disclosed, M: ≤129 items.
The maximum aggregate disclosure score (MAD) that a company can be expected to
obtain is:
n

MDS = di
i=1

Where di = expected item of disclosure included in the scoring sheet, n = the number of
items included in the scoring sheet which are applicable to the company (i.e. ≤129).
EUFD Disclosure Compliance Index (EUFDCDI) as a measure of the extent of disclosure
in compliance with the EU disclosure requirement is: EUFDCDI = DS/MDS. A disclosure
index was created for the sampled each company over the period covered in this study.

3.2. Selection of period covered

The period selected in this study was a 10-year span covering two years prior to the
enactment of the Capital Market Board Communiqué CMBC No. XI/1 (1986–1987), three
years subsequent to the enactment of the CMBC (1991–1992 and 1995). This study focused
on the period surrounding the year that the CMBC was enacted, because the enactment of the
CMBC is one of the most important recent developments in the area of financial reporting
in Turkey, and this regulation, which has been claimed to be influenced by the EUFD,
increased substantially the minimum disclosure requirements for publicly owned Turkish
642 T. Çürük / Critical Perspectives on Accounting 20 (2009) 635–650

companies (see Çürük, 2001a), the period surrounding the year that the CMBC was enacted
was considered to be one of the best periods to look at to assess the if there is a move
by Turkish companies towards the compliance with the EU disclosure requirements. The
reason for covering more than one year for pre- and post-CMBC periods is because looking
at more than one year would provide a better picture of the disclosure compliance patterns
of companies before and after the CMBC was introduced.

3.3. Selection of sample

The research sample (i.e. companies whose annual reports were analysed in this study)
consisted of 61 non-financial Turkish companies registered with the Capital Market Board
(CMB) during the 1986–1995 period.
On the basis of the list obtained from the CMB and ISE and using Moser and Kalton’s
(1979) formula, the required sample size was found to be 62. To allow for the possibility
of unobtainable annual reports, a total of 75 companies were randomly selected and full set
of annual reports of 61 companies (about equal to the required sample size) of which 32
listed on the Istanbul Stock Exchange and 29 unlisted for the five years were obtained. A
full set of the annual reports of these companies over five years covered in this study were
obtained from the ISE and the CMB. The total number of annual reports analysed was 305.

3.4. Data analysis procedures

Having measured the companies’ extent of disclosure in compliance with the EUFD by
an index (i.e. EUFDCDI), first, the index scores was analysed for each year to assess the
companies’ compliance with the EU disclosure requirements. To be able to test if there were
significant changes in the extent of disclosure in compliance with the EUFD over the years,
the following hypothesis (H01) was set and both parametric paired-samples t-test and its
non-parametric version, Wilcoxon Matched-pairs signed-ranks test, were conducted.

H01 . there are no changes in the extent of disclosure in compliance with the EUFD in the
annual reports of Turkish companies over the period 1986–1995.

Furthermore, using the companies EUFDCDI score as dependent variables and corporate
characteristics (i.e. size, listing status and industry type) as independent variables, multi-
variate analyses was run for each year to find out if the companies’ level of compliance
with the EU disclosure requirements were influenced by their corporate characteristics. The
multivariate analysis carried out in this study was the multiple regression. First, tests of
normality, multicollinearity, homoscedasticity and linearity on the independent variable for
each year covered in this study were conducted to ensure that the assumptions were not
violated. Then, the Ordinary Least Square (OLS) regression was run for each year covered
in this study to test the following main and sub-hypotheses (H0n ), which were set up to
find out if the companies’ level of compliance with the EU disclosure requirements were
influenced by their corporate characteristics, i.e. size, listing status and industry type.

H0n . There is no association between a number of company-specific factors and the extent
of the disclosure in compliance with the EUFD in the annual reports of Turkish companies.
 T. Çürük / Critical Perspectives on Accounting 20 (2009) 635–650 643

H0n1 . There is no association between total assets and the extent of the disclosure in
compliance with the EUFD in the annual reports of Turkish companies.

H0n2 . There is no association between listing status and the extent of the disclosure in
compliance with the EUFD in the annual reports of Turkish companies.

H0n3 . There is no association between industry type and the extent of the disclosure in
compliance with the EUFD in the annual reports of Turkish companies.

The regression equation used is as follows:

Y(1−5) = α0 + β1 D1 + β2 D2 + β3 D3 + β4 D4 + β5 D5 + β6 D6 + β7 D7
+ γ1 X(1−5) + ε
Where Y = disclosure indices (Y1 for 1986, Y2 for 1987, Y3 For 1991,Y4 for 1992 and Y5 for
1995); D1 = listing status; D2 = machinery and metal product company group; D3 = cement
and building equipment company group; D4 = textile product company group; D5 = glass,
glassware and forestry product company group; D6 = Food and services company group;
D7 = Chemical product company group; D1 − D7 = dummy 0/1 variables; X(1–5) = company
size – total assets – (X1 for 1986, X2 for 1987, X3 for 1991, X4 for 1992, X5 for 1995);
ε = error terms; α0 = intercept (constant); β, γ = coefficient of the explanatory variables.

4. Companies’ compliance with the EU disclosure requirements

Descriptive statistics for the EUFDCDI, which provides a summary of sampled Turkish
companies’ extent of disclosure in compliance with the EUFD over the years selected in
this study, are presented in Table 1.
As can be seen in Table 1, none of the companies in the sample fully complied with
the required disclosure by the EUFD over the period examined. The extent of disclosure
in compliance with the EUFD was observed to be within the range of 30–85% during the
10-year period 1986–1995. It is interesting to note that, during the early years (1986 and
1987), the EUFDCDI scores of all the companies in the sample were within the range of
30% and 50%, but the EUFDCDI scores for all of the sampled companies with the exception

Table 1
Descriptive statistics of the EUFDCDI over the 5 years
1986 1987 1991 1992 1995
Mean 0.378 0.386 0.701 0.705 0.727
Maximum 0.495 0.495 0.843 0.848 0.849
Minimum 0.296 0.297 0.484 0.484 0.492
Range 0.199 0.198 0.360 0.365 0.357
S.D. 0.048 0.050 0.076 0.074 0.071
Standardised Kurt. −0.611 −0.825 0.323 0.401 1.002
Standardised Skew. 1.451 1.474 1.866 −1.683 −1.950
K–S Lilliefors 0.043 0.011 >0.2000 >0.2000 >0.2000
644 T. Çürük / Critical Perspectives on Accounting 20 (2009) 635–650

Fig. 1. The extent and changes in the extent of disclosure in compliance with the EUFD (average across all
companies).

of one were over 50% in 1991, 1992 and 1995. In addition, the mean score of the EUFDCDI
was about 38% in 1986 and 1987, about 70% in 1991 and 1992, and just over 72% in 1995.
The companies’ compliance pattern with the disclosure provisions of the EUFD over the
years can be seen in Fig. 1, which was developed based on the mean score and changes in
the mean score of the EUFDCDI.
The general trend that can be observed from the above figure is that the sampled com-
panies have, over the selected years, been providing in their annual reports increasingly
more information of which disclosure is required by the EUFD. The mean score of the
EUFDCDI increased from 37.8% in 1986 to 72.7% in 1995. Despite the fact that the mean
score of the EUFDCDI has increased constantly from one year to another, only 0.8%, 0.4%
and 2.4% of the observed 34.9% total average changes in the EUFDCDI over the entire
period examined in this study occurred during the periods 1986–1987, 1991–1992, and
1992–1995, respectively. A dramatic increase was observed during the five-year span from
1987 to 1991 (the average change in the EUFDCDI was 31.5%).
In order to test H01, “there are no changes in the extent of disclosure in compliance
with the EUFD in the annual reports of Turkish companies over the period 1986–1995”,
the EUFDCDI scores were grouped into five pairs (1986–1987; 1987–1991; 1991–1992;
1992–1995 and 1986–1995), and the parametric paired-samples t-test2 and its non-
parametric version, Wilcoxon Matched-pairs signed-ranks test, were run. The results are
summarised in Table 2.
As can be seen the from the above table, the null hypothesis was rejected for each
pair of years which means that there were significant changes in the extent of disclosure
in compliance with the EUFD in the annual reports of the Turkish companies over the

2 To be able to use the parametric t-statistic, the assumption that the sample is drawn from a normally distributed

population must be satisfied. As indicated by the Kurtosis and Skewness statistics, which were within the range
of ±1.96 (see Table 1), the EUFDCDI for each year appear to be normally distributed.
 T. Çürük / Critical Perspectives on Accounting 20 (2009) 635–650 645

Table 2
Summary of the results of the paired-samples t-test and the Wilcoxon Matched-pairs signed-ranks test on the
EUFDCDI
Differences Paired-samples t-test Wilcoxon test
between
Mean S.D. t-Value 2-Tail sig. Accept H01 Z 2-Tailed P Accept H01
1986–1987 −0.008 0.020 −3.28 0.00** NO −3.52 0.00** NO
1987–1991 −0.315 0.078 −31.36 0.00** NO −6.79 0.00** NO
1991–1992 −0.004 0.014 −2.33 0.02* NO −2.33 0.02* NO
1992–1995 −0.021 0.038 −4.40 0.00** NO −4.34 0.00** NO
1986–1995 −0.349 0.072 −38.02 0.00** NO −6.79 0.00** NO
* Significant at 5% level, ** significant at 1% level.

period 1986–1995. As the mean score of the EUFDCDI increased from one year to another
(see Fig. 1), the above results show that the sampled companies’ extent of disclosure in
compliance with the EUFD increased significantly over the years (with the exception of
changes from 1991 to 1992, which were significant at the 5% level, changes in other paired
years are significant at the 1% level).

5. Corporate characteristics influencing companies’ compliance

As pointed out above, multiple regression routines were conducted for each year using
EUFDCDI as the dependent and company size (measured by total assets), listing status and
industry type (based on six industry grouping) as independent variables to asses whether the
companies’ level of compliance with the EU disclosure requirements had been influenced
by their corporate characteristics. As this study covers five years, the data set may also be
considered to be panel data which may be analysed by a pooled method of regression anal-
ysis. The suitability of pooled data analysis, however, depends on factors such as whether
there are any parameter shifts over the years (Johnson et al., 1989).3 As the analysis of
regression coefficients for each year revealed that the coefficients have shifted over time, a
pooled analysis approach is considered not suitable for analysing the data set (see Johnson
et al., 1989) and only cross-sectional regressions were conducted for each of the five years.
Such cross-sectional regressions allow us to identify not only if there is a significant associ-
ation between selected company-specific factors and the extent of disclosure in compliance
with the EUFD for each year but also if such a relationship is consistent over time.
One of the problems of undertaking any multiple regression analysis is that there may be
multicollinearity between independent variables. The possible occurrence of multicollinear-
ity was checked by running a complete correlation matrix for all five years and a major
multicollinearity problem was not observed between the independent variables in any of
the five years covered in this study. A second problem is that whilst the independent size
variable is continuous, the other two variables (listing status and industry type) are not.
Since multiple regression analysis is to be used, each category of these two independent
variables required dummy variables for each of the years covered in this study. Conse-

3 The pooled equation assumes that the coefficients (the structure of underlying equation) do not change over

the five years of the analysis (Johnson et al., 1989, p. 198).

646 T. Çürük / Critical Perspectives on Accounting 20 (2009) 635–650

quently, there are two dummy variable within the independent variables listing status and
six dummy variables within the independent variable industry type. It should be noted that
for each independent variable with dummies, one of the dummies is left out of the equation
to avoid perfect colinearity.
In order to undertake multiple linear regression, the data must fulfil certain conditions i.e.
normality, homoscedasticity (equal variance) and linearity. An examination of the scatter-
plots of the regression standardised predicted values against the residuals for each year did
not indicate any relationship. Hence, the conditions of linearity and homoscedasticity were
not violated (Kinnear and Gray, 1995, p. 174). Furthermore, an examination of Q–Q plot of
residuals for each regression model indicates that the distributions of residuals are approx-
imately normal. Thus, the assumption of normality was also satisfied (See Norusis, 1995).
The OLS regression models for each of the five years were conducted using the “enter
all variables” routine. A summary of results for all five years are shown in Table 3.
As can be seen in Table 1, the results of the multiple regression routines for 1986,
1987, 1991, 1992 and 1995 yielded F values of 2.325, 1.971, 3.146, 3.863, and 5.808
respectively. The observed significance level (sign. F) was found to be less than the 0.05
over the selected four years and less than 0.10 for 1987. This means that collectively three
independent variables significantly explain the variations in EUFD Disclosure Compliance
Index (EUFDCDI index) at 0.05 significance level for 1986, 1991, 1992 and 1995, and 0.10
level for 1987. Thus, the results reject the main hypothesis H0n, suggesting that Turkish
companies’ level of compliance with the required disclosure by EUFD had been influenced
by their three corporate characteristics – listing status, sizes and industry – (collectively)
for each year selected in this study.
Despite the fact that the association between the companies’ extent of disclosure in
compliance with the EUFD and three variables (collectively) was found to be significant
for each year, Table 3 reveals that the degree of explanation by the selected independent
variables was different for the five years. In terms of adjusted R2 , the 1986 model explains
about 13.4% of the variability in the EUFDCDI, the 1987 model 10.2%, the 1991 model
20.0%, the 1992 model 25.0% and the 1995 model 35.9%. Hence, these results provide
strong indication which suggest that influence of companies’ three corporate characteristics
on their level of compliance with the required disclosure by the EUFD increased over the
years covered in this study.
An examination of T statistics and its observed significance level of the independent
variables (see Table 3) showed that, listing status was significantly associated with the
companies’ extent of disclosure in compliance with the EUFD at the 0.05 level in years
1988, 1991, 1992 and 1995. That is, the sub hypothesis H0n2 “There is no association
between listing status and the extent of the disclosure in compliance with the EUFD in the
annual reports of Turkish companies” was rejected for four years. Thus, the results suggest
that Turkish companies’ level of compliance with the required disclosure by EUFD had
been influenced by listing status.
Since listed companies were coded (1) and unlisted companies coded (0) when the
dummy variable for listing status was constructed, the unlisted category which is left out
of the equations, is the yardstick against which the other (listed companies) is measured.
Since the β (partial regression coefficient) for the listing status variable is positive for each
of the five years, it can be concluded that listed companies’ compliance with the disclosure
 T. Çürük / Critical Perspectives on Accounting 20 (2009) 635–650 647

Table 3
Result of multiple regression routines
1986 1987 1991 1992 1995
Multiple R 0.485 0.455 0.542 0.581 0.659
R square 0.235 0.207 0.294 0.338 0.434
Adjusted R square 0.134 0.102 0.200 0.250 0.359
Standard error 0.045 0.047 0.068 0.064 0.0569
F value 2.325 1.971 3.146 3.863 5.808
Sig. F 0.038** 0.071* 0.007*** 0.002*** 0.000***

Variables Years Coefficient (β) S.E. (β) T Sig. T

Listing status 1986 1.977E−02 0.013 1.562 0.124
1987 3.095E−02 0.013 2.319 0.024**
1991 6.738E−02 0.019 3.498 0.001***
1992 6.782E−02 0.018 3.701 0.001***
1995 6.587E−02 0.016 4.099 0.000***
Company size 1986 2.196E−07 0.000 1.636 0.108
1987 9.849E−08 0.000 1.045 0.301
1991 2.272E−09 0.000 0.149 0.882
1992 5.106E−09 0.000 0.537 0.593
1995 3.672E−10 0.000 0.464 0.644
Machinery company group 1986 2.249E−02 0.024 0.954 0.345
1987 2.775E−02 0.025 1.111 0.272
1991 −1.860E−02 0.036 −0.516 0.608
1992 −2.353E−02 0.034 −0.687 0.495
1995 −5.284E−02 0.030 −1.756 0.085*
Cement and building equipment 1986 1.398E−02 0.025 0.560 0.578
company group 1987 8.762E−03 0.026 0.332 0.741
1991 8.555E−03 0.038 0.224 0.823
1992 3.480E−03 0.036 0.096 0.924
1995 −1.432E−02 0.032 −0.448 0.656
Textile company group 1986 −7.869E−03 0.027 −0.291 0.772
1987 1.564E−02 0.029 0.547 0.586
1991 −2.280E−02 0.041 −0.552 0.584
1992 −3.418E−02 0.039 −0.876 0.385
1995 −8.311E−02 0.035 −2.403 0.020**
Glass glassware and forestry 1986 −7.247E−03 0.024 −0.299 0.766
prod. company group 1987 3.711E−03 0.026 0.145 0.886
1991 −3.460E−02 0.037 −0.932 0.356
1992 −3.802E−02 0.035 −1.083 0.284
1995 −6.369E−02 0.031 −2.052 0.055*
Food and services company group 1986 1.984E−02 0.028 0.716 0.477
1987 2.234E−02 0.029 0.762 0.449
1991 3.112E−02 0.042 0.733 0.467
1992 2.322E−02 0.040 0.576 0.567
1995 −3.281E−02 0.035 −0.925 0.359
Constant 1986 0.353 0.023 15.056 0.000***
1987 0.351 0.025 14.147 0.000***
1991 0.676 0.036 18.877 0.000***
1992 0.684 0.034 20.201 0.000***
1995 0.737 0.030 24.575 0.000***
*** Significant at 1% level, ** significant at 5% level, * significant at 10% level.
648 T. Çürük / Critical Perspectives on Accounting 20 (2009) 635–650

provisions of the EU directives is significantly higher than the unlisted companies for the
years 1987, 1991, 1992 and 1995.
An important point to note is that, there was an increase in the β and T value of the listing
status variable from one year to another, and decrease in sig. T, suggesting that there was an
increase in explanatory power of the independent variable listing status over the years. As
the disclosure compliance level of listed companies was significantly greater than unlisted
companies, the increase in explanatory power of variable listing status indicates that Listed
companies’ moves towards compliance with the EU disclosure requirements over the years
is greater than unlisted companies.
An examination of regression statistics (i.e. T statistics and sig. T, see Table 3) of the
independent size variable showed that assets size was not significantly associated with the
companies’ extent of disclosure in compliance with the EUFD at the 0.05 level in any year
covered in this study. The results which do not reject the H0n1 , suggest that size is not
one of the factors influencing Turkish companies’ level of compliance with the disclosure
requirements of the EUFD.
As far as industry type is concerned, the regression statistics indicated that only the
‘textile’ category of industry was significantly associated with the EUFDCDI at the 0.05
level in 1995 (H0n3 ) was rejected only for the ‘textile’ category of industry in 1995). That is,
the results provide strong indication suggesting that industry type is not one of the factors
influencing Turkish companies’ level of compliance with the disclosure requirements of the
EUFD.

6. Conclusion

Accounting disclosure practices of countries are shaped by a number of factors. One

of the factors shaping financial reporting, including accounting disclosure, in the EU is
accounting directives, in particular the EUFD. The EUFD has been claimed to have an
impact on not only the EU countries but also non-EU member European countries like
Turkey: A non-EU member of European country which has an inspiration to join the EU
and close economics and political relationship with the EU. This study examined Turkish
companies’ level of compliance with the disclosure requirements of the EUFD over the
years and then assessed whether companies’ level of compliance had been influenced by
their corporate characteristics, such as company size, listing status and industry type.
The results of this study established that Turkish companies’ level of compliance with the
disclosure requirements of the EUFD were within the range of 30–85% over the years and
increased significantly from one year to another throughout the selected period. A dramatic
increase, however, occurred during the five-year interval (from 1987 to 1991) which was the
period that spans the year that the CMBC was enacted. Since the CMBC, enacted in 1989,
laid down detailed disclosure requirements for publicly owned Turkish companies and there
were strong indications that the disclosure provisions of the CMBC was influenced by the
EUFD (see Çürük, 2001a), the observed dramatic increase in the Turkish companies’ level
of compliance with the disclosure provision of the EUFD over the period 1986–1995 seems
to be mainly due to the enactment of the CMBC. Hence, these results indicate a degree of
indirect impact of the EUFD on corporate disclosure practices of Turkish companies.
 T. Çürük / Critical Perspectives on Accounting 20 (2009) 635–650 649

The results of this study further revealed that Turkish companies’ level of compliance
with the required disclosure by the EUFD had been influenced by their corporate charac-
teristics. Significant association found between listing status and EUFDCDI for each of the
five years covered in this study revealed that listing status is one of the important corporate
characteristics of Turkish companies influencing their level of compliance with the EUFD
disclosure requirements. On the other hand, the results of this study do not provide any
evidence suggesting that Turkish companies’ level of compliance was influenced by their
size. Similarly, the results did not provide strong evidence lead us to conclude that industry
type is one of the important corporate characteristics of Turkish companies influencing their
compliance with the EUFD disclosure requirements.
There is no perfect study and this study is no exception. One of the main limitation of
this study is related with the period covered. This study focused on the examination of
Turkish companies’ compliance with the EU disclosure requirements for five years over the
1985–1995 period, for the above pointed out reasons. Future research may, therefore, be car-
ried out by focusing on recent years to provide up-date evidences as regards to Turkish com-
panies’ level of compliance with the EU disclosure requirements and factors influencing it.

References

Adams CA, McMillan KM. Internationalising financial reporting in a newly emerging market economy: the Polish
example. Advances in International Accounting 1997;10:134–69.
Adhikari A, Tondkar RH. Environmental factors influencing accounting disclosure requirements of global stock
exchange. Journal of International Management and Accounting 1992;4(2):75–105.
Alexander D, Archer S. The European accounting guide. London: Academic Press; 1992.
Al-Modahki J.S. An Empirical Study of Accounting Disclosure Development in the Kingdom of Saudi Arabia,
Ph.D. Thesis, University of Exeter, UK, 1996.
Al-Mulhem A.A. An Empirical Investigation of Level of Financial Disclosure by Saudi Arabian Corporations,
Ph.D. Thesis, University of Hull, UK, 1997.
Barret ME. Financial reporting practices: disclosure and comprehensiveness in an international setting. Journal of
Accounting Research 1976;14(1):11–26.
Boross AH, Clarkson AH, Fraser M. Pressure and conflicts in moving towards harmonisation of accounting
practice: the Hungarian experience. The European Accounting Review 1995;4(4):713–37.
Briston RJ. The evolution of accounting in developing countries. International Journal of Accounting Education
and Research 1978;14(1):105–20.
Choi FDS, Mueller GG. International accounting. 2nd ed. New Jersey, USA: Prentice-Hall Inc.; 1992.
Cooke TE. An empirical study of financial disclosure by Swedish companies. New York & London: Garland
Publishing; 1989a.
Cooke TE. Disclosure in the corporate annual reports of Swedish companies. Accounting and Business Research
1989b;19(74, Spring):113–24.
Cooke TE. The impact of size, stock market listing, and industry type on disclosure in the annual reports of
Japanese listed corporations. Accounting and Business Research 1992;22(87):229–37.
Cooke TE, Wallace RSO. Global surveys of corporate disclosure practices and audit firms: a review essay.
Accounting and Business Research 1989;20(77):47–57.
Cooke TE, Wallace RSO. Financial disclosure and its environment: a review and further analysis. Journal of
Accounting and Public Policy 1990;9:79–170.
Çürük T. An analysis of factors influencing accounting disclosure in Turkey. İstanbul: İstanbul Stock Exchange;
2001a.
Çürük Turgut. An empirical analysis of the impact of independent external audit on accounting disclosure by Turk-
ish companies. Boğaziçi Journal: Review of Social Economic and Administrative Studies 2001b;15(2):87–108.
650 T. Çürük / Critical Perspectives on Accounting 20 (2009) 635–650

Emenyonu EN, Gray SJ. EC accounting harmonisation: an empirical study of measurement practices in France,
Germany and the UK. Accounting and Business Research 1992;23(89):49–58.
Federation des Experts Comptables Europeens. European survey of published financial statements in the context
of the fourth EC Directive, Federation des Experts Comptables Europeens, 1989.
Federation des Experts Comptables Europeens, FEE European survey of published accounts, Routledge, London,
1991.
Giner BG. The influence of company characteristics and accounting regulation on information disclosed by Spanish
firms. The European Accounting Review 1997;5(2):45–68.
Haniffa R.M. Culture, Corporate governance and disclosure in Malaysian corporations, Ph.D. Thesis, University
of Exeter, UK, 1998.
Herrmann D, Thomas W. Harmonisation of accounting measurement practices in the European Community.
Accounting and Business Research 1995(Autumn):253–65.
Hopwood AG. Some reflections on the harmonisation of accounting within the EU. The European Accounting
Review 1994;3(2):241–53.
Johnson JR AC, Johnson MB, Buse RC. Econometrics: basic and applied. Singapore: Macmillan Publishing
Company; 1989.
Kinnear PR, Gray CD. SPSS for Windows made simple. Erlbasm, UK: Taylor and Francis Publishers; 1995.
Lukas W. Austria. In: Alexander D, Archer S, editors. The European accounting guide. London: Academic Press;
1992. p. 703–31.
Moser CE, Kalton G. Survey methods in social investigation. In: 3rd. ed. UK: Dartmouth Publishing Co., Ltd.;
1979.
Nasi S. Finland. In: Alexander D, Archer S, editors. The European accounting guide. London: Academic Press;
1992. p. 733–65.
Nobes C, Parker R. Comparative international accounting. 4th ed. UK: Prentice Hall; 1995.
Norusis MJ. SPSS 6.1 Guide to Data Analysis. Englewood Cliffs, NJ: Prentice-hall; 1995.
Raffournier B. Switzerland. In: Alexander D, Archer S, editors. The European accounting guide. 2nd ed. London:
Academic Press; 1995. p. 1249–78.
Roberts CB, Salter SB, Kantor J. The IASC comparability project and current financial reporting reality: an
empirical study of reporting in Europe. British Accounting Review 1996;28:1–22.
Singhvi SS, Desai HB. An empirical analysis of the quality of corporate financial disclosure. The Accounting
Review 1971;XLVI(1):120–38.
Soh C.S. Factors influencing company information disclosure: An empirical study of companies listed on the
Kuala Lumpur stock exchange, Ph.D. Thesis, University of Warwick, UK, 1996.
Spero, L.L. The extent and causes of voluntary disclosure of financial information in three European capital
markets: an explanatory study, Unpublished Doctoral Dissertation, Harvard University, 1979.
Stanga K. Disclosure in published annual reports. Financial Management 1976(Winter):42–52.
Tay S.W. Corporate Financial Reporting Regulatory Systems and Comparability, Ph.D. Thesis, University of
Exeter, UK, 1989.
Van Hulle K. Accounting in Europe: harmonisation of accounting standards: a view from the European community.
The European Accounting Review 1992;1(1):161–72.
Wallace RSO. Accounting in developing countries: a review of the literature. Research in Third World Accounting
1990;1:3–54.
Wallace RSO, Naser K. Firm-specific determinants of the comprehensiveness of mandatory disclosure in the
corporate annual reports of firms listed on the stock exchange of Hong Kong. Journal of Accounting and
Public Policy 1995;14:311–68.
Wallace RSO, Naser K, Mora A. The relationship between the comprehensiveness of corporate annual reports and
firm characteristics in Spain. Accounting and Business Research 1994;25(97):41–53.
Walton P. Harmonization of accounting in France and Britain: some evidence. ABACUS 1992;28(2):186–99.