The listed companies are deliberately hiding important and compulsory information in their financial disclosures, thus misguiding the investors.
A research conducted under the Academic Innovation Fund (AIF) of the University Grants Commission (UGC) of Bangladesh and the World Bank (WB) revealed the companies' tendency in hiding mandatory information while making financial disclosures.
The research was conducted on 94 listed companies by taking into account 190 items, which are supposed to be disclosed in financial disclosures in accordance with the Company Act, the Securities and Exchange Commission Rules 1987 and International Accounting Standard (IAS).
Mizanur Rahman, director of the project taken under AIF, said the listed companies are not making financial disclosures duly, as the disclosure rules cannot be enforced properly due to shortcomings in the capital market regulatory bodies.
"Most of the companies in Bangladesh are controlled by members of same family, and the financial disclosures are not made properly following influence of powerful shareholders," Rahman told the FE.
He said another reason behind poor financial disclosures is the attachment of controlling shareholders, also the company insiders, to its management.
According to the research, the mandatory information, kept hidden in financial disclosures include: unsecured short-term borrowings, deferred taxation system, deferred tax liabilities, break-up of intangible assets, value of land and buildings, and accumulated impairment losses at the beginning and end of project etc.
It also found that, among 95 listed companies, 20 hid names of their top employees, lines of authorities and their remunerations.
Disclosure on the directors' outside affiliation was relevant for 81 companies, but only 29 companies disclosed the information.
By checking the financial disclosures of 39 listed companies it was found that only 17 complied with such provision.
Among 75 companies, only 37 disclosed the information of their unsecured short-term borrowings.
Besides, provision for disclosing doubtful debts was checked in the disclosures of 63 companies, and only 22 were found disclosing such information.
Out of 29 companies, 10 disclosed the amount of commitments for acquisition of property and plants.
Among 64 companies, 41 made public the description of nature and purpose of their reserves.
Out of 19 companies, only four disclosed exceptional or unusual credits or charges.
Among the companies, on which the research was conducted, 18 were from textile sector, 16 from pharmaceuticals sector, three from ceramics sector, four from cement sector, 18 from engineering sector, 8 from fuel and engineering sector, 13 from food sector, 8 from IT sector, and remaining six from service sector.
When asked, Bangladesh Securities and Exchange Commission (BSEC) executive director and spokesperson Mohammad Saifur Rahman said their corporate finance department monitors the companies' financial disclosures from time to time.
"Our department concerned scrutinises the companies' financial disclosures, and the abnormalities are disclosed only after the decisions regarding enforcement actions are finalised," he added.
The DSE officials could not be reached to comment on their role in containing inadequate financial disclosures of the listed companies.
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