The Relationship between forward-looking disclosure and performance-related variables in the annual reports of listed Egyptian firms

*Purpose: the main objective of this study is to test the relationship between numbers of variables representing the firm characteristics (performance-related variables) and the extent of the level of voluntary disclosure (forward-looking disclosure) in the annual reports of Egyptian firms listed in Egyptian Stock Exchange. This study empirically investigates hypothesized impact of performance-related variables on the extent of forward-looking disclosure.
*Design/methodology/approach: this study uses a list of forward-looking keywords to determine the differences in the level of forward looking disclosure between firms in different sectors. The sample included 49 non-financial firms listed in Egyptian Stock Exchange for the years 2017, 2018 and 2019. The statistical analysis is implemented using a multiple linear regression analysis.   
*Findings: the results show that profitability (measured by earning per share) and liquidity ratio were significantly positive with the level of forward-looking disclosure in years 2018 and 2019. While, they were insignificant with the level of forward-looking disclosure in year 2017.
 
However, profitability (measured by return equity ratio) variable was found insignificantly associated with the level of forward-looking information disclosed in the annual reports for all the three years.
*Research limitations/implications: The results of this paper may be used by number of users such as auditors, lenders and investors. These results may be beneficial for users when they are dealing with firms which have low profitability and high financial risk.
This study has some limitations. First, the study used the same list of forward-looking items applied in previous studies. Second, the items selected did not show their level of importance observed by financial information users. Third, the study used unweights approach to measure the level of forward-looking disclosure. Finally, the study concentrated on non-financial listed firms in Egyptian Stock Exchange and excluded financial and insurance firms.
*Originality/value: The results of this study are more important to the investment community in evaluating the extent of forward-looking disclosure in valuation of the firm characteristics (performance-related variables) by Egyptian firms as Egypt is a developing country. There is a little number of studies to the knowledge of the researcher that have examined the forward-looking information disclosure in developing countries in general and in the Middle East in particular. Moreover, all previous studies examined the forward-looking disclosure in the annual reports for only one year, but this study examined it for a relatively long period (three years).
This study adds that high leverage and low profitability are the major factors that could encourage Egyptian listed firms to increase their forward-looking information disclosure.