Introduction

Disclosure is an all-inclusive information given by corporations to the outside users of the information for their informed judgment. Disclosure is important because it is the primary means of communication among management and outside investors as well as market participants in general (Hassan and Marston, 2019). The lack, absence, and low level of disclosure given by Ethiopian firms is the one and the most frequently stated problem in various research findings such as (Debeb Asmare and Viswanadham, 2022; Mengesha, 2016; Bitew, 2015). Ethiopian financial institutions, among them banks have not strictly followed the statutory disclosure requirements and they are on a low degree of disclosure index (Abera, 2014; Ali Khan, 2015). Reporting firms are not at the required level to fulfill and comply with the disclosure and reporting requirements because of their reluctance and incapability to prepare and disseminate their reporting in agreement with the statutory requirements (AABE, 2015; Wagaw et al., 2018). This problem must be tackled by reporting organizations to improve their transparency, and availability of information regarding their activity and to minimize information asymmetry between insiders and outsiders. However, there is no comprehensive research in Ethiopia that evaluates and analyses the disclosure level of commercial banks in Ethiopia after the newly adopted IFRS disclosure requirements. Thus, this paper is designed to evaluate the disclosure level of commercial banks in Ethiopia from the perspective of financial and social disclosure items using IFRS disclosure requirements. The study also has relevance in identifying the disclosure level of Banks and delivering recommendations to bank leaders and policymakers. Moreover, nowadays Ethiopia is preparing to establish the first-ever stock market which will require listed firms to have adequate information dissemination to market participants. So this research is relevant to showing the bank’s level of disclosure and helps them to prepare in advance for listing requirements of the coming stock market.

Empirical literature review

Financial disclosure

Financial disclosure is a mandatory disclosure given by reporting firms. The level of a firm’s financial disclosure is assessed based on requirements of accounting standards such as IAS/IFRS. Using IFRS mandatory disclosure requirements Sultana et al. (2017) studied the financial disclosure practice of financial sector companies in Bangladesh. They categorize the disclosure items into general disclosure, statement of financial position disclosure, statement of profit and loss and OCI (other comprehensive income) disclosure, stockholders’ equity disclosure, statement of cash flows disclosure, and accounting policies and notes to financial statements disclosure. The grouping of these disclosure items is similar to KPMG’s disclosure requirements. The result of their study reveals that financial sector companies do not comply with all the mandatory financial disclosure requirements with an average disclosure level of 56.35% of the items of information. Further, they studied the association between company-specific characteristics and mandatory disclosure and they found that company age, size and profitability have significant associations with degree of disclosure.

In a similar study, Askary and Jackling (2005) assessed and measured the financial disclosure diversity. They used International accounting standards disclosure requirements and grouped the disclosure items into six groups’ general information, balance sheet information, profit and loss, cash flow statement, accounting policies, and other information. They conducted their study as a comparative study across Asian and Middle Eastern countries. They have been used 126 publicly listed companies on the countries’ stock exchanges. Their research result found that the countries included in the study had a relative degree of conformity with IAS disclosure requirements.

Another comparative study regarding compliance with disclosure requirements across countries is done in Africa between Ghana and Kenya. Atsunyo et al. (2017) compare the disclosure compliance level of 31 companies listed on the Ghana Stock Exchange and 50 companies listed on the Nairobi Stock Exchange. They used IFRS disclosure checklists to compute the disclosure compliance score. They found an overall compliance score of 97.1 and 74.5% between Kenya and Ghana respectively. They conclude that Kenya’s higher disclosure compliance score is attributed to the older stock exchange in Kenya and the earlier adoption of IFRS.

The most recent disclosure compliance study conducted by Tasnim and Mahmud (2022) shows that the average disclosure compliance is 72.77% by the private banks in Bangladesh. The highest level of disclosure compliance they found is 80% with a negative deviation from the average. In categorizing the themes of financial disclosure they follow Sultana et al. (2017) disclosure checklist grouping approach.

Kribat (2009) investigates the extent of disclosure compliance of Libyan banks. The finding of the study indicates that banks failed to comply with obligatory disclosure rules; the average level of compliance was 89% (with a range of 74–97%). In terms of total levels (required plus optional) of financial disclosure in Libyan banks’ annual reports, the statistics were low; sample institutions disclosed just 54% of information items on average (with a range of 39–67%). The study also found that profit and age tend to have a favorable impact on total financial disclosure level, whereas size appears to have a negative impact.

Using a disclosure checklist of 132 mandatory disclosure requirements, Zango et al. (2015) investigated the disclosure compliance level of Nigerian banks. They employed the PricewaterhouseCoopers disclosure checklist to examine the disclosure level of Nigerian Banks. Their findings reveal non-compliance with disclosure requirements. However, compliance is above average for the years 2012 and 2013.

Through applying descriptive statistics Abe et al. (2020) assessed the disclosure compliance of Nigerian listed firms and found none of the firms fully adhered to disclosure requirements. In assessing the disclosure level they used self-constructed disclosure checklists based on international accounting standards. In addition, they found that disclosure levels have a statistically significant influence on the preservation of shareholders’ interests.

The financial disclosure requirements given by proposed standards for SMEs are also used as a benchmark to assess the level of firms’ compliance with disclosure requirements. In this regard, Ballas and Tzovas (2010) investigated the compliance of Greek firms with disclosure requirements using the disclosure checklists of accounting standards for SMEs with a sample of 32 listed firms. In their analysis, they applied univariate tests and a multivariate regression model. Their result indicates that on average firms comply with about two-thirds of the disclosure requirements. Moreover, they examined the relations of firm-specific characteristics with the extent of disclosure compliance and they found that disclosure compliance is positively and significantly influenced by listing status.

Public companies which are more profitable and smaller in size with a classification of conglomerates or listed on the stock exchange have extensive disclosure practices. Listing status, industry type, and profitability have a positive influence on financial disclosure. However, size has a negative influence on the extent of financial disclosure (Vlachos, 2001).

Financial disclosure compliance is positively related to auditor choice after controlling for firm size, profitability, leverage, degree of international diversification, and whether a firm has a U.S. listed or not (Hodgdon et al., 2009).

The empirical evidence documented by Juhmani (2017), indicates disclosure increased with the proportion of independent board members and the proportion of independent audit committees, however, disclosure is the decreasing function of CEO duality. Companies with higher levels of institutional ownership and foreign representation on the board are more likely to engage an audit firm with international affiliation and comply with IFRS recognition and disclosure requirements (Ebrahim and Fattah, 2015).

Corporate governance variables are also factors that determine the disclosure level of firms. In this regard, Kabwe et al. (2021) examined the relationship between corporate governance attributes and financial disclosure compliance level. The findings show a positive link between board size, board independence, and disclosure compliance. An audit committee’s independence and disclosure compliance have a statistically significant negative association.

Regarding the relationship between corporate governance and disclosure compliance level, an empirical study was also documented in selected Gulf countries by Almaqtari et al. (2021). The findings show that audit committee characteristics have a greater influence on disclosure compliance and financial reporting quality than other corporate governance methods.

The degree of disclosure compliance is determined by companies’ motivations for disclosing or concealing information, as well as the local circumstances for key users, auditors, and regulators. Increased dependence on entities operating in “good faith” when complying with disclosure obligations, particularly in scenarios where entities are in high-incentive positions with low consequences of non-compliance, is potentially dangerous in terms of how well the standards protect main users from bad disclosers. To ensure a specific minimum level of transparency, more focus should be placed on ensuring that the disclosure obligations are enforceable and auditable (Hellman et al., 2018).

Disclosure is an important element for investors to make an informed decision. According to Hossain (2022), there is a considerable relationship between the many concerned components of investors’ decisions and the disclosure score of each segment of the disclosure index. He also demonstrated that the disclosure scores of the various components of the disclosure index had a considerable favorable influence on the other relevant components of investors’ judgments.

Most of the financial disclosure level studies conducted around the globe such as in US firms, gulf countries, and African countries indicate that companies do not fully comply with disclosure requirements. The disclosure compliance level of firms is affected by both firm-specific and governance mechanisms. In several empirical literature, it is stated that financial disclosure is an important tool to create information symmetry and enhance investment decision-making.

Social disclosure

The other aspect of disclosure practiced by firms is corporate social disclosure usually termed “corporate social responsibility disclosure.” This type of disclosure given by firms is important as it is used as a mechanism to create transparency between the firm and various stakeholders.

As indicated in the study of Singhania and Gandhi (2015) in recent years companies have focused on social disclosure. It is because of that “the stakeholders are increasingly paying more and more attention to social issues in a company. Investors and financial analysts need social information to evaluate overall performance and estimate social risks; government needs information to implement social regulations and consumers need the information to protect their rights.” In their study, Dropulić and Čular (2019) also indicated that companies give more attention to social disclosure to respond to the pressures that come from the public and media.

Social disclosure is the approach companies use to disclose their social responsibility activities and it is the way to reduce the gap between the firm and the stakeholders (Said et al., 2009). The objective of social disclosure is to disclose the involvement of the corporation in social activities and its impact on society (Hamid, 2004). Social disclosure is to alter the traditional culture of business is business to include morals, and values, and consider the social and environmental implications of business activities (Habbash, 2017).

Corporate social responsibility is an unavoidable trend in today’s world. Organizations to the community and society must maintain the fairness of stakeholder interests. This is an issue that requires global attention, not just national or regional attention (Tran et al., 2020).

Corporate social disclosure focuses on some dimensions discussed in several empirical studies. The following are the empirical studies that used commonly discussed dimensions of social disclosure.

Uyar et al. (2014) studied the association between firm-specific characteristics and voluntary disclosure. In their study of voluntary disclosure items, they used some social disclosure dimensions such as environmental disclosures, corporate social responsibility disclosures, employee disclosures, and corporate strategy disclosures. Their findings show a link between the extent of voluntary information disclosure and characteristics such as business size, auditing firm size, the share of independent directors on the board, institutional/corporate ownership, and corporate governance. However, in their finding, it was observed that leverage and ownership dispersion had a negative significant relationship with the level of voluntary disclosure.

Al-Gamrh and Al-Dhamari (2016) also investigated the relationship between firm characteristics and social disclosure by categorizing it into four themes (which are organizational profile, environmental information, employee information, and community information). They utilized the disclosure index to assess the level of CSR disclosure and discovered that Saudi enterprises had a low level of CSR disclosure with an average score of 15.4% per item. According to their study, large, government-owned, and older companies release more CSR information.

Ajibolade and Uwuigbe (2013) investigate the effect of governance variables on social disclosure in Nigeria using five disclosure dimensions which include, environment, energy, research and development, employee health and safety, and community involvement. In their study using descriptive statistics they found an average of 48.58% of social disclosure levels ranked as low level of disclosure. From regression output, they found that an effective board with a greater number of nonexecutive directors (independent directors), as well as bigger and higher-quality audits, will be more supportive of corporations to disclose a broader variety of information to stakeholders, including social and environmental information.

Similarly, Said et al. (2009) conducted a study in Malaysia using social disclosure dimensions which include, environment, energy, products, employee health and safety, and community involvement. They found a low level of corporate social disclosure which is 13.9% on average determined using the disclosure index. Further, they found that the extent of corporate social responsibility disclosure is positively and strongly connected with government ownership and audit committees.

Kansal (2011) studied the social disclosure practice of Indian companies using seven dimensions (which are environment, energy, community involvement, employee health and safety, and other employee issues and products). Using disclosure index computation she found a low level of disclosure score which is on average 40.46%. She also researched the relationship between company size and corporate social disclosure and discovered a positive and substantial relationship.

Dropulić and Čular (2019) investigated the disclosure practice of corporate social activity in Croatia using seven dimensions which are; human resources, Community involvement and charity, business strategy and market relations, customer/Client relations, products, and environmental concern. From the six disclosure dimensions, they found an average disclosure level of 35%.

Romito and Vurro (2021) performed research in US-listed corporations to see if the structure of non-financial disclosure, defined as the distribution of financial, social, and environmental information as part of the dialog between a firm and its stakeholders, reduces information asymmetry. They use a stakeholder perspective of the company to assess the structure of non-financial disclosure along three dimensions: depth, breadth, and concentration. The quantity of non-financial transparency and the range of stakeholder-related subjects included in the reports lessen information asymmetry, according to their findings. Furthermore, organizations with consistent information distribution across stakeholder groups benefit from lesser opacity and reduced information asymmetry.

The cross-country research on South Asian countries conducted by Bae et al. (2018) investigated corporate governance elements and total sustainability disclosure practices. They consider a set of insightful theories, notably the signaling and agency theories, to comprehend the motivations and drivers of sustainability disclosure. Their findings revealed a positive and substantial association between overall sustainability disclosure and foreign shareholding, institutional shareholding, board independence, and board size. They discovered, on the other hand, that director ownership is negatively but significantly related to overall sustainability disclosure.

The degree of voluntary (including social aspects) disclosure varies across reporting entities, and various factors influence this difference (Debeb Asmare and Viswanadham, 2022).

To evaluate the effects of governance variables on corporate social disclosure level, Tran et al. (2020) undertook a study in Vietnam commercial banks. They found that board size, foreign members of the board, and the audit committee are three elements that favorably enhance corporate social responsibility disclosure.

Zaid et al. (2019) investigated the effects of governance practice on corporate social disclosure. They reveal that the level of corporate social reporting has slightly increased over the study period. Furthermore, their findings reveal that board size and independence have a positive and statistically significant effect on the amount of corporate social disclosure, whereas gender diversity has a positive but statistically negligible influence. However, their result documented that, CEO dualism is inversely and strongly associated with CSR disclosures.

Mou and Ma (2023) found that the quality of A-share-listed banks’ social information disclosure is not higher level in China, although it is improving year by year. They also empirically researched the elements that influence the quality of social information disclosure. Their findings reveal that corporate size, dual listing, and board size all have a considerable favorable impact on the quality of A-share-listed banks’ social information disclosure.

The corporate social disclosure dimensions used by previous researchers such as (Ajibolade and Uwuigbe, 2013; Al-Gamrh and Al-Dhamari, 2016; Dropulić and Čular, 2019; Kansal, 2011; Kiliç et al., 2015; Romito and Vurro, 2021; Said et al., 2009; Tran et al., 2020; Uyar et al., 2014) to quantify the social disclosure level are almost same except slight variation for terms used; for example products disclosure used in one researcher may use as research and development disclosure by another researcher and vice versa. The majority of the empirical studies found low levels of social disclosure and social disclosure is affected by both firm characteristics and governance mechanisms.

Objective of the study

Thus the purpose of this study is to assess the financial and social disclosure level of Ethiopian commercial banks using an unweighted disclosure index approach and compare the disclosure levels of private and public commercial banks in Ethiopia.

Method

In this study, a descriptive study design was used to explain the disclosure level of Ethiopian commercial banks using the mean, max, min, percentage, and standard deviation of financial and social disclosure levels. In addition to the descriptive statistics, an independent t-test was used to compare the disclosure levels of private and public commercial banks in Ethiopia. The data to meet the objectives stated above were collected from secondary sources using the bank’s reports. The study covered 6 years of data from 2017 to 2022 for seventeen commercial banks operating in Ethiopia. Seventeen banks were selected purposively which have been operated for more than 6 years (Table 1). Then, the disclosure level was determined using Cooke’s (1992) equation, discussed below for each year to each bank. The data set is panel data to assess the disclosure level of the banking industry.

Banks included in the study and data source link

Measures of disclosure index

The measurement approach used to measure the disclosure level was the unweighted total disclosure index approach which was developed by (Cooke, 1992) and used by several empirical studies such as (Abe et al., 2020; Al-Gamrh and Al-Dhamari, 2016; Debeb Asmare and Viswanadham, 2022; Dropulić and Čular, 2019; Singhania and Gandhi, 2015; Tran et al., 2020).

The weighted disclosure index has been criticized because it may be the source of bias toward a particular user orientation (Barako et al., 2006; Uyar et al., 2014), and it is designed based on a subjective individual judgment of importance rating about the weights of items disclosed (Alsaeed, 2006). Therefore, using an unweighted index to measure disclosure level is recommended. In an unweighted index, each disclosure item is considered equally important (Haniffa and Cooke, 2002). Under the unweighted disclosure index approach, dichotomous values are given to each item as 1 if a company disclosed the applicable item or 0 if it did not (Cooke, 1992).

Thus, the disclosure items are quantified as follows using Cooke’s dichotomous approach:

$${FDI}\,{or}\,{SDI}=\left(\mathop{\sum }\limits_{i=1}^{{nj}}{xij}\right)/{nj}$$

Where FDI and SDI are financial disclosure index and social disclosure index respectively, nj is the number of maximum disclosure items for firm jth and xij is coded as 1 if the ith item is disclosed and 0 if the ith item is not disclosed; thus 0 ≤ FDI ≤ 1, 0 ≤ SDI ≤ 1.

Disclosure dimensions(themes) used

The following are the disclosure themes with a number of specific items included in the financial and social disclosure checklist. The financial disclosure checklists used are prepared by KPMG international under disclosure themes of General Disclosure, statement of financial position, statement of profit and loss, statement of change in equity, statement of cash flow, and Accounting policy & other financial disclosures as used by studies of (Sultana et al., 2017; Tasnim Rahman and Mahmud, 2022). The social disclosures are based on six dimensions (community involvement and charity, human resources, business strategy and market relations, client relations, products, and environmental concern) adopted from (Dropulić and Čular, 2019; Tran et al., 2020). The following structural presentation illustrates (Fig. 1) the construction of disclosure checklists.

Fig. 1
figure 1

Financial and Social Disclosure Themes.

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The disclosure themes given in (Fig. 1) are used as a checklist to check whether the information is disclosed or not in each year’s annual-report for each bank. Then if the item disclosed given one if not given zero and sum up together. Then the sum is divided to the maximum number of items to be disclosed and the level of disclosure for that given year is determined in percentage. In such a process, the disclosure level of 6 years for each bank was calculated and set as panel data. Then, descriptive statistics were applied to the panel data to assess the disclosure level of the banking sector in Ethiopia. The annual reports of each bank were used as the source of the data to calculate the disclosure level and it was accessed from the website of each bank indicated in Table 1.

Table 1 List of banks and data source link.
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Results and discussion

Disclosure level of the Ethiopian commercial banking industry

The following section discusses the disclosure level (financial and social) of Ethiopian commercial banks. The first section discusses about both the financial and social disclosure level by a sub-group of disclosure items, the second section deals with the overall financial and social disclosure level, and the third section discusses the bank’s distribution across the range of disclosure levels. Finally, the fourth section of the analysis deals with the comparison of the financial and social disclosure levels between private and public commercial Banks.

Financial and social disclosure level of Ethiopian commercial banks

Table 2 summarizes the descriptive statistics of financial disclosure and social disclosure by subgroups of disclosure items. The general disclosure index has an average disclosure score of 81.1% with a maximum and minimum value of 96.4 and 46.4% respectively which deviated from the mean at the standard deviation of 12.6%. The financial position disclosure index which consists of the disclosure items regarding financial position has a mean value of 63.3% between the range of 13 and 90% that is deviated with a standard deviation of 14.7%. The profit and loss disclosure index also incorporates disclosure items regarding the profit and loss statement and has an average disclosure score of 66.2% with a minimum and maximum value of 18.4 and 84.2% respectively with a standard deviation of 16.7%. The stockholders equity disclosure index also has an average disclosure score of 73.5% that ranges from 23.1 and 92.3% with variability of 16.8%. The other disclosure theme included in the financial disclosure section is the statement of cash flow disclosure index which has a mean value of 61.6% with a minimum and maximum value of 30.8 and 92.3% respectively, which deviates from the mean at standard deviation of 9.6%. The final disclosure theme in the financial disclosure is the accounting policy and other notes disclosure index which has an average disclosure score of 54.5% with a minimum and maximum value of 7.8 and 79.7% respectively which has a standard deviation of 17.7%.

Table 2 Descriptive statistics of financial and social disclosure dimensions.
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From Table 2 it’s understandable that from the themes included in the financial disclosure index, the general disclosure index has the highest level followed by the stockholder’s disclosure index and profit and loss disclosure index, which have an average disclosure level of 81.1, 73.5, and 66.2% respectively. This implies that in their annual reports, the commercial banks in Ethiopia disclose more information regarding their general background information which incorporates, the domicile and legal form of the bank, its nature of operation, its principal activities, its basis of financial statement preparation, about the set of financial statements prepared, about the comparative presentation of financial statements and other similar disclosures. The lowest disclosure index in comparison to other dimensions is the accounting policy and other notes disclosure index with a mean disclosure score of 54.5%, however, still it is in the moderate range of disclosure score. This implies that in comparison to other financial disclosure themes Ethiopian commercial banks give less disclosure about their accounting policy.

The standard deviation indicates the variation of individual records from the mean value. This means the high standard deviation explains the high variability of the records over the year. Thus, from the financial disclosure themes the highest standard deviation is the standard deviation of accounting policy and other notes disclosure index which is 17.7% and implies the accounting policy and other disclosure index in the commercial banks of Ethiopia is highly variable and inconsistent between the years of 2017–2022 included in the study in comparison to other financial disclosure themes. Whereas, the lowest standard deviation is the standard deviation of the statement of cash flow disclosure index which has a deviation of 9.6% and implies that the disclosures given regarding the statement of cash flow are consistent and less variable in Ethiopian commercial banks during the years 2017–2022.

Table 2 also illustrates the disclosure score of the individual themes included in the social disclosure index. Community involvement and charity disclosure index have an average disclosure score of 37.2% with a maximum and minimum value of 0 and 100% respectively which deviates from the mean at standard deviation of 24.1%. The second theme in the social disclosure index is the disclosures given to human resources with an average disclosure index of 55.3% that has a minimum and maximum value of 31.3% and 87.5% respectively with a standard deviation of 10.9%. The business and strategy disclosure index has a mean value of 80.55% with a 63.6% minimum value, 90.9% maximum value, and standard deviation of 6.6%. The product/service disclosure index which deals with the disclosures given regarding the services of the bank has an average disclosure index of 44.1% with a minimum and maximum value of 20 and 80% respectively which deviates with a standard deviation of 10.3%. The environmental concern disclosure index has a mean value of 46.6% with maximum and minimum values of 100 and 0% respectively which deviates with a standard deviation of 20.9%. The final disclosure theme included in the social disclosure index is the client/ customer’s relation and other disclosure index which has an average disclosure score of 19.8% with minimum and maximum values of 0 and 57.1% respectively which deviates from the mean at a standard deviation of 15.8%

From the social disclosure dimensions, the highest average disclosure score is registered by business strategy and market relation disclosure (80.5%) followed by human resource disclosure (55.3%) and environmental disclosure (44.1%). This implies that Ethiopian commercial banks are disclosing more information in their annual reports about their business strategy and market relations than other social disclosure themes. From the dimensions of the social disclosure index, the lowest disclosure practiced by commercial banks in Ethiopia is client relation & other disclosure (19.8%). It implies that in their annual reports during the periods of 2017–2022 Ethiopian commercial banks disclose less information about their customer relation in comparison to other social disclosure dimensions.

When we look at the standard deviation of social disclosure dimensions, understandably, the highest standard deviation is 24.1% which is the standard deviation of community involvement and charity disclosure followed by 20.9% which is the standard deviation of environmental disclosure. This result implies that the disclosures given by Ethiopian commercial banks during the years 2017–2022 are highly variable and inconsistent when they are compared to other social disclosure dimensions.

Overall financial and social disclosure level and trend

Table 3 illustrates the overall average financial and social disclosure level of commercial banks in Ethiopia. The maximum and minimum levels of financial disclosure of commercial banks in Ethiopia are 24.3 and 82.2% respectively. The average financial disclosure level of commercial banks in Ethiopia is 64.1%. According to Aboagye‐Otchere et al. (2012), the level of disclosure score is classified into three ranges. Less than 40% low level, between 40 and 60% moderate level, and greater than 60% high level. Thus in terms of overall financial disclosure, the commercial banks in Ethiopia have a high level of disclosure which has a mean value of 64.1% but it is below the disclosure compliance level of all African countries average which is 73.09% (Tawiah and Boolaky, 2019). In comparison to the best performers in African countries (Mauritius 82.56%, South Africa 80.8.5%, and Kenya 76.58%) (Tawiah and Boolaky, 2019) the disclosure compliance score by commercial banks in Ethiopia is much lower. On the other hand, the maximum and minimum levels of social disclosure are 32.7 and 72.7% respectively, with an average value of 50.8%. Again as per the benchmarks developed by Aboagye‐Otchere et al. (2012) the overall social disclosure level of commercial banks in Ethiopia is moderate. To compare with the result of previous studies the average social disclosure level of Ethiopian commercial banks is higher than Nigerian Banks which is 48.58% (Ajibolade and Uwuigbe, 2013) although there is a year’s difference between the two studies. Further compared with the recent social disclosure study by Dropulić and Čular (2019) in Croatian insurance companies which has an average social disclosure of 35%, Ethiopian commercial banks have higher social disclosure.

Table 3 Descriptive statistics of overall financial and social disclosure.
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The standard deviation of the financial disclosure index is 14.3% which is higher in comparison to the standard deviation of the social disclosure index which is 7.9%. This implies that Ethiopian commercial banks have a higher variability in their financial disclosure index than the social disclosure index during the year 2017–2022.

Graphical analysis of the financial and social disclosure trend

The graph below illustrates the trend of the mean financial and social disclosure scores of Ethiopian commercial banks for the study period. Thus, the trend indicates an increase over the year 2017–2022 for both financial and social disclosure index scores. From the graph, it is understandable that the minimum disclosure level for both financial and social disclosure was registered in 2017 and the maximum financial and social disclosure level was recorded in 2022. This implies that when banks started implementing the new Proclamation 847/2014 by the year 2017 they were less compliant with disclosure requirements however when they became familiar with all the reporting and disclosure requirements of the proclamation their disclosure score improved over the year.

Credit: Stata 15 output

Banks distribution by disclosure score range

Further, Table 4 illustrates the number of banks that fall in each of the financial disclosure score ranges. From the total number of banks included in the study, two banks have a moderate level of financial disclosure score and the remaining fifteen banks have a high level of financial disclosure score. Thus, the result implies that most of the banks included in the study have a higher financial disclosure score. Similarly, the table also shows the number of banks that fall in each of the average social disclosure score ranges. In this regard, three banks have a high level of social disclosure score. The other remaining fourteen banks have a moderate level of social disclosure score.

Table 4 Number of banks across financial and social disclosure score range.
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Independent t-test between public and private banks’ disclosure level

The independent t-test is conducted to test the existence of a significant difference between the public and private banks’ average financial and social disclosure scores. This test of comparison is done with an assumption of equal variance. That means the variation between the two independent groups’ mean value is zero. Thus, the null hypothesis states that: the mean value of the financial disclosure and the mean value of the social disclosure of private and public banks in Ethiopia is equal.

As illustrated in Table 5 there is no significant difference between the overall financial and social disclosure level between public and private banks. Since the p-value of the test result is greater than 0.05 there is no significant difference between the disclosure level of public and private commercial banks. This means accepting the null hypothesis which is “the mean value of financial disclosure and the social disclosure of private and public banks in Ethiopia is equal.” This result occurred because all banks operated in Ethiopia harmonized their accounting system to the international accounting standards in the same time horizon (AABE, 2015) and may not create a significant difference in their disclosure practice since all banks are starting the preparation of standardized annual reports with required disclosures.

Table 5 Two-sample t-test with equal variances.
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Conclusion

The purpose of the study was to analyse and evaluate the financial and social disclosure level of Ethiopian commercial banks using an unweighted disclosure index measurement approach. Regarding the dimensions of financial disclosures, the study result reveals that the highest level is the disclosure about general disclosure items followed by stockholders equity and profit and loss disclosure items with disclosure scores of 81.1, 73.5 and 66.2% respectively. On the other hand during the study period, commercial banks in Ethiopia disclosed less information about their accounting policies and other related notes than other disclosure items with an average score of 54.5%. The overall average financial disclosure level of Ethiopian commercial Banks is 64.1%.

From the result, it is concluded that all financial disclosure dimensions are grouped under the higher disclosure score range except accounting policy disclosure which is grouped under a moderate range of disclosure score. The overall financial disclosure level of commercial banks in Ethiopia during the study period is in the higher range with an average value of 64.1%. However, the financial disclosure level of Ethiopian commercial banks is lower than the African country’s average disclosure compliance score.

During the periods included in the study, the result reveals that out of seventeen banks included in the study 15 banks have higher financial disclosure levels and the remaining 2 banks have moderate financial disclosure levels. Thus, we can conclude that most commercial banks in Ethiopia have a higher level of financial disclosure and there are no commercial banks in Ethiopia scored low level of disclosure scores during the study period.

Moreover, regarding the social disclosure score, the result indicated that from the disclosure themes used in the social disclosure score business strategy and market relation have higher disclosure scores followed by human resource and environmental disclosure which have an average disclosure score of 80.5, 55.3, and 46.6% respectively. The lower disclosure level from social disclosure themes is client relation and other disclosure items with an average score of 19.8%. Further, the result shows that the overall average social disclosure score of Ethiopian Commercial Banks is 50.8%. Regarding the dispersion of banks across the disclosure score range, fourteen banks had moderate levels of social disclosure scores, and the remaining three banks had higher levels of disclosure scores.

From the result, it is possible to conclude that in the social disclosure themes, only business strategy and market relation disclosure scores are grouped in the higher range and all other themes are grouped in the moderate range except community involvement and charity disclosure themes and client relation and other disclosure theme which are grouped under the lower disclosure score range.

In addition, from the result, we can conclude that the overall social disclosure level of Ethiopian commercial banks is grouped in the moderate range of scores. Most Ethiopian commercial banks have a moderate level of social disclosure for the periods included in the study.

The independent t-test test result indicated that no significant difference between public and private commercial banks in Ethiopia in terms of financial and social disclosure levels.

Implications and suggestions for future studies

Implications

The study result implies that commercial Banks in Ethiopia practice social disclosure inconsistently and irregularly in terms of format and quantity of information; the statutory bodies such as the Accounting and Auditing Board of Ethiopia (AABE) are recommended to regulate and follow up Banks to make their disclosure fully comply with disclosure requirements given by IASB/IFRS. Moreover, from the analysis output, it is recommended that Ethiopian Commercial Banks should disclose more to improve their financial and social disclosure to achieve the maximum compliance level of disclosure. So, their level of disclosure is helpful for them to be transparent to the shareholders, to various stakeholders, and to the community at large. Further, their level of transparency resulting from higher disclosure levels will maximize the likelihood to be listed in the coming stock exchange in Ethiopia that will be functioning by 2024; if they perform well in their disclosure level. In addition, the result implies that from the financial disclosure themes the accounting policy disclosure aspects and, from the social disclosure themes client relation disclosure aspects should improve at least to score a moderate level of disclosure in each of the themes.

Suggestions for future studies

The current study is essential for future studies because it is the first study in Ethiopia which is undertaken by differentiating the disclosure given as financial and social disclosures. Thus, using as a reference this study, future researchers may undertake the same research across industries to compare the results and to find a variety of evidence across different industries. In addition, future researchers may use an elongated number of years and a larger sample size to come up with more comprehensive results. Moreover, future works can investigate the effects of some micro and macro-level variables on the disclosure index.