International Journal of Science and Society, Volume 4, Issue 3, 2022

The Effect of Firm Size, Profitability, Leverage,

and Financial Distress on Voluntary Disclosure
in Annual Report
Menik Indrati1*, Sherina Oktaviana Aulia2
1,2Esa Unggul University, Indonesia

*Email: [email protected]

Abstract

The purpose of this study is to figure out the effect of firm size, profitability, leverage, and
financial distress on voluntary disclosure in company’s annual financial report. This study
consists of one dependent variable which is voluntary disclosure and four independent
variables which are firm size measured by natural logarithm (Ln) on total assets, profitability
measured by Return on Assets (ROA), leverage measured by Debt to Equity Ratio (DER),
and financial distress measured by Interest Coverage Ratio (ICR). The research data has
21 companies with the object of consumer goods industrial companies listed on Indonesia
Stock Exchange (IDX) during period 2018-2020, so the research are 21 companies with
63 data samples. This study uses multiple linear regression analysis method, and uses the
application of the Statistical Program for Social Science (SPSS). The result of this study is
firm size, profitability, leverage, and financial distress have a simultaneous effect on
voluntary disclosure of annual report. The result of t-test (partially) showed that firm size
has a positive significant effects on the voluntary disclosure, profitability has a positive
significant effects on the voluntary disclosure, leverage has no significant effect on the
voluntary disclosure, and financial distress partially has a negative significant effects on
voluntary disclosure.

Keywords: Firm Size, Profitability, Leverage, Financial Distress, Voluntary Disclosure.

—————————— ——————————

A. INTRODUCTION
The current economic conditions continue to experience changes that have
quite an impact on the business world. Therefore, the availability of company
information is an important factor for investors in considering their investment
decisions. It is important for companies to disclose specific information so that
investors can assess the prospects and performance of a company. Research
(Krisdayanti & Wibowo, 2019) explains the reliability of the company which can
actually be realized by making disclosures. Related to this, it is necessary for
companies to disclose information voluntarily in order to avoid information
asymmetry, so that voluntary disclosure is still an important topic because the
urgency is very high. Moreover, in the face of intense business competition triggered
by the development of the business world, investors will be more careful in checking
all company information specifically (Farras & Faisal, 2020).
With the development of economic conditions, company size becomes an
important factor in facing business competition. Company size indicates the size of a
company. One of the advantages of large companies is that they have low risk because
large companies have control over market conditions (Juhandi et al., 2019). Large

IJSOC © 2022
http://ijsoc.goacademica.com

326
International Journal of Science and Society, Volume 4, Issue 3, 2022

companies also have indications that they have reached the maturity stage and are
considered capable of generating profits compared to small companies (Husna &
Satria, 2019).
Business managers are constantly making efforts to generate profits and
remain competitive. Every company certainly wants a profit in every sale, so this can
be calculated using the profitability ratio (Masdupi et al., 2018). According to
(Siswanto, 2021), profitability describes the company's ability to generate profits
through assets, sales, or company capital. The company's capability and ability to
generate and maximize profits will be the main concern of investors (Lambey, 2021).
Every company certainly has needs, where these needs are always related to
funds for the purpose of running their business smoothly. So in this case, debt is
considered as one of the solutions to facilitate production activities and maintain the
company's position so that it continues to operate. Debt is seen as a lever that can
increase the company's capability to generate profits (Lumapow, 2018). According to
(Anwar, 2019) leverage shows the use of debt and the company's ability to pay debts.
In order to maintain business continuity in a sustainable manner, every
company is also required to be able to make the best decisions. One of them is the
decision on how the company manages finances so as not to face financial distress
(financial distress) and bankruptcy (Masdupi et al., 2018). Financial distress describes
the condition of the company being unable to fulfill its obligations (Arifin, 2018).
Financial distress refers to the worsening of the company's financial condition before
going bankrupt (Indrati & Putri, 2021).
As a goal to improve the quality and transparency of information in the annual
financial statements, voluntary disclosure is important for every company. Voluntary
disclosure discloses information voluntarily by the company and is not required by
the competent authority (Banupriya, 2018). Research (Farras & Faisal, 2020;
Krisdayanti & Wibowo, 2019) states that voluntary disclosure provides several
benefits for investors, including reducing the level of information asymmetry and
increasing transparency in reporting.
Research (Nurudeen et al., 2019) proves that leverage and profitability have a
negative effect on voluntary disclosure of financial service firms listed on the Nigeria
Stock Exchange (NSE). This research also proves that the size of the company has a
significant positive effect on voluntary disclosure. Voluntary disclosure was found to
be negatively affected by the leverage variable, positively influenced by firm size, and
not affected by profitability (Putra et al., 2020). Research (Pernamasari, 2020) found
that voluntary disclosure was positively influenced by the profitability variable, and
negatively influenced by the financial distress variable, and not influenced by the
leverage variable. However, what distinguishes this research from previous research
is that this study adds a firm size variable.
This is because the size of the company can represent the financial
characteristics of the company, where large companies can control market conditions
and have a greater impact on society. This study also measures the voluntary
disclosure index items using items developed by researchers from Indonesia. The
IJSOC © 2022
http://ijsoc.goacademica.com

327
International Journal of Science and Society, Volume 4, Issue 3, 2022

research was conducted on companies in the consumer goods industry sector in 2018-
2020. This sector was chosen as the sample because it is a branch of a manufacturing
company that is actively operating in the capital market and the demand for this
industrial product tends to be stable.
This study aims to strengthen the previous research which is expected to
provide benefits to the company by examining the variables that affect voluntary
disclosure in the annual financial statements of companies listed on the Indonesia
Stock Exchange (IDX) and objectively measuring the effect of company size,
profitability, leverage and financial distress on the extent of voluntary disclosure
simultaneously or partially.

B. LITERATURE REVIEW
1. Company Size, Profitability, Leverage and Financial Distress on the Area of
Voluntary Disclosure
In research (Nurudeen et al., 2019) it is proven that firm size significantly affects
the extent of voluntary disclosure. Research (Putra et al., 2020) also proves that
leverage has a negative effect and firm size has a positive effect on the extent of
voluntary disclosure in annual financial statements. (Pernamasari, 2020) proves that
profitability has a positive effect on voluntary disclosure in the annual financial
statements, while the financial distress variable in this study has a negative effect on
the extent of voluntary disclosure.
Many factors affect the extent of voluntary disclosure such as company size,
profitability, leverage, and financial distress. This overall relationship shows that the
independent variables of profitability, leverage, firm size, and financial distress have
a joint effect on the extent of voluntary disclosure. Then the first hypothesis can be
formulated as follows:
H1: Firm Size, Profitability, Leverage, and Financial Distress simultaneously affect the
extent of voluntary disclosure.

2. Company Size to Area of Voluntary Disclosure

The amount of information submitted in the annual financial statements will
increase along with the increase in company size, because large companies tend to
have more information needs and demands from external parties than small
companies (Putri, 2020). According to (Hariri, 2021) large companies experience
greater demands in conveying broad disclosures because they are more visible in the
capital market and the wider community.
Research (Nurudeen et al., 2019) proves that larger companies are more likely
to disclose important information more broadly. (Dahiyat, 2020) proves that larger
companies engage in extensive voluntary disclosure. Based on the explanation above,
the second hypothesis in this study is:
H2: Firm size has a positive effect on the extent of voluntary disclosure

IJSOC © 2022
http://ijsoc.goacademica.com

328
International Journal of Science and Society, Volume 4, Issue 3, 2022

3. Profitability to the Area of Voluntary Disclosure

With the high profit earned, the company will convey more information with
the aim of providing an overview of the company's performance, therefore the extent
of information disclosure will increase along with the increase in profitability (Rakiv,
2019). According to (Pernamasari, 2020), the market views companies that release a
lot of information as performing well, therefore a high profitability ratio encourages
them to disclose more information in their annual financial statements.
Research (Rakiv, 2019) proves that the profitability variable has a significant
positive effect on the extent of voluntary disclosure in the annual financial statements.
The findings (Dahiyat, 2020) also show that profitability affects the level of voluntary
disclosure positively, so here is the third hypothesis of this study:
H3: Profitability has a positive effect on the extent of voluntary disclosure.

4. Leverage on the extent of Voluntary Disclosure

Companies that have a high proportion of debt will reduce voluntary
disclosure in annual financial statements because debt is considered a negative signal
for investors to invest (Nurudeen et al., 2019). This situation will also make it difficult
for companies to obtain funding from external parties because investors are afraid of
the company's inability to pay off its debts so that companies do not make extensive
disclosures (Putra et al., 2020).
According to research (Nurudeen et al., 2019) a higher level of corporate
leverage reduces the amount of disclosure made by the company. Leverage has been
shown to reduce the level of voluntary disclosure made in the annual financial
statements in research (Putra et al., 2020). Based on the explanation above, the fourth
hypothesis is formulated as follows:
H4: Leverage has a negative effect on the extent of voluntary disclosure.

5. Financial Distress on the Area of Voluntary Disclosure

According to (Pernamasari, 2020) when a company is in a financially depressed
condition (bad news), management will tend to be more personal and provide limited
information. This is done so that the company avoids a bad image in front of investors.
On the other hand, if the company's finances are in good condition, management is
more likely to publish the information in the hope of improving the company's
reputation among investors. In general, companies that are in a stronger financial
position are more open to detail than those in a weaker position (Putri, 2020).
Research (Pernamasari, 2020) found a negative correlation between financial
distress and the extent of voluntary disclosure. The results of research conducted by
(Putri, 2020) prove that financial distress has no significant effect on the extent of
voluntary disclosure. Then the fifth hypothesis can be formulated as follows:
H5: Financial distress has a negative effect on the extent of voluntary disclosure.

IJSOC © 2022
http://ijsoc.goacademica.com

329
International Journal of Science and Society, Volume 4, Issue 3, 2022

C. METHOD
This study applies quantitative methods so that it requires measurement of
each variable. Operational variables in this study examine the effect of independent
variables consisting of profitability, leverage, firm size, and financial distress on the
extent of voluntary disclosure as the dependent variable. Profitability is proxied by
Return on Assets (ROA) which is calculated by comparing net income to total assets.
Leverage is proxied by the Debt to Equity Ratio (DER) which is calculated by
comparing total debt to total equity (Abadi et al., 2019).
Company size can be measured in terms of total assets, sales, and market
capitalization. In this study, company size is expressed by the natural logarithm value
of total assets (Putri, 2020). Financial Distress is proxied by the Interest Coverage Ratio
(ICR) which is based on research (Pernamasari, 2020; Putri, 2020) which is calculated
by comparing operating profit to financial expenses or interest expenses. The
dependent variable of this study is the extent of voluntary disclosure as proxied by
the Voluntary Disclosure Index (IPS). The Voluntary Disclosure Index (IPS) is
obtained from the result of dividing the amount of information released by the
amount of information expected. To test the extent of voluntary disclosure in this
study, a list of disclosure items refers to research (Puspasari & Rahmah, 2018; Jayanti
et al., 2019) with a list of 33 voluntary disclosures developed by (Suripto, 1999).
The model used in this study will explain the relationship between the
independent variable and the dependent variable under study to make it easier for
readers to understand the direction of the research. The research model made as
follows:

Figure 1. Research Model

Source: Data processed by the author, 2022
This study utilizes data from the company's annual financial statements
published on the Indonesia Stock Exchange (IDX) as well as the official websites of
companies listed on the IDX as sources of information and findings. The sample of
this study was selected using a purposive sampling approach, and the selection
criteria included companies registered in the consumer goods industry sector,
publishing annual financial reports consistently and having positive profits. There are
30 companies that complete these terms and criteria, so the data collected is 90
companies in the consumer goods industry sector operating in Indonesia.
IJSOC © 2022
http://ijsoc.goacademica.com

330
International Journal of Science and Society, Volume 4, Issue 3, 2022

In this research effort, multiple linear regression approach was used for the
data analysis process. Before being tested using the classical assumption test, there
are normality tests, multicollinearity tests, heteroscedasticity tests, and
autocorrelation tests. Hypothesis testing consists of simultaneous significance test (F
statistic test) and partial significance test (T statistical test), and multiple linear
regression test. The multiple linear regression model in this study is stated as follows:

Figure 2. Multiple Linear Regression Model

Source: Data processed by the author, 2022
Information:
Y = Dependent variable (Voluntary Disclosure Index)
β0 = Constant
β1-4 = Regression Coefficient
CZ = Company Size
PRT = Profitability
LEV = Leverage
FDS = Financial Distress
ε = Error

D. RESULT AND DISCUSSION

1. Descriptive Statistics Test
Descriptive statistics is a method to describe and provide an overview of the
frequency distribution of the variables in a study. The results of descriptive statistical
tests in this study are presented in the following table:
Table 1. Descriptive Statistics Test

Source: Output data processed by the author, 2022

The descriptive statistical analysis test in this study shows the amount of data
for each valid variable is 63 data, where based on table 1 above the company size is
proxied by LN, the minimum value is 25.95 based on total assets at Pyridam Farma
Ltd, the maximum value is 32.73, namely at Indofood Sukses Makmur Ltd, with a
mean of 29,045 or 29%, and a standard deviation of 1.60. The size of the company
shows an average that tends to be evenly distributed. This means that consumer
goods industry companies have relatively similar company sizes.
The ROA proxy for profitability yields a minimum value of 0.00 or 0%, a
maximum value of 0.14 or 14%. The mean is 0.060 higher than the standard deviation
IJSOC © 2022
http://ijsoc.goacademica.com

331
International Journal of Science and Society, Volume 4, Issue 3, 2022

of 0.036. This reflects that there is no very high deviation, so that the variability in the
data is normal and does not cause bias. DER proxy for leverage obtained a minimum
value of 0.13 or 13%, a maximum value of 2.42 or 242%. The average DER is 0.835, and
the standard deviation is 0.535. From a total of 63 data obtained 16 company data or
25% have a high DER (DER value more than 1) and 47 company data or 75% of
companies that have a low DER level (DER value less than 1). That is, in a period of 3
years, on average, many companies in the consumer goods industry have a low DER.
Financial distress proxied by ICR obtained a minimum value of 0.95 or 95%, a
maximum value of 26.25 or 262%, with an average of 6.543, and a standard deviation
of 6.131. Financial distress uses a dummy variable, where if it has a minimum value
of 0 it means the company is a healthy company and if the maximum value is 1 it
means the company is experiencing financial difficulties (Pernamasari, 2020). From a
total of 63 data obtained 61 company data or 97% including companies that are
financially sound and 2 company data or 3% including companies experiencing
financial difficulties. That is, in a period of 3 years, on average, many companies in
the consumer goods industry have good finances. IPS shows a minimum score of
39.39 produced by Tempo Scan Pacific Ltd and a maximum value of 81.82 generated
by Kalbe Farma Ltd. The standard deviation value is 8,938 and the dependent variable
average is 62,290, meaning that in one annual financial reporting period the average
consumer goods industry sector company has revealed 62.2%.

2. Classic Assumption Test

The classical assumption test is a statistical requirement that must be met in
multiple linear regression analysis based on ordinary leases square (OLS). The results
of several stages of classical assumption testing consisting of normality test,
multicollinearity test, heteroscedasticity test and autocorrelation test are presented in
the following table:
Table 2. Normality Test

Source: Output data processed by the author, 2022

The normality test in this study used the Kolmogorov-Smirnov test where the
initial significance result showed a value of 0.002 < 0.05 so the data was said to be
abnormal. Abnormalities in the data were overcome by data disposal or so-called
outliers as many as 9 companies, so that the research sample used was 63. The results
obtained showed asymp sig 0.200 where the results were above a significant value of
0.05 which means the data is normally distributed.

IJSOC © 2022
http://ijsoc.goacademica.com

332
International Journal of Science and Society, Volume 4, Issue 3, 2022

Table 3. Multicollinearity Test

Source: Output data processed by the author, 2022

In multicollinearity test all VIF values are less than 10 and tolerance values are
above 0.1. The results obtained are the VIF value of the firm size variable (Ln) of 1.339
< 10 with a tolerance of 0.747 > 0.1, the VIF value of the profitability variable (ROA) of
1.780 < 10 with a tolerance of 0.562 > 0.1, the VIF value of the leverage variable (DER)
of 1.629 < 10 with a tolerance value of 0.614 > 0.1, the financial distress (ICR) variable
VIF value of 2.002 < 10 with a tolerance value of 0.500 > 0.1. Judging from these results,
the independent variables in this study were free from multicollinearity.
Table 4. Heteroscedasticity Test

Source: Output data processed by the author, 2022

In this heteroscedasticity test using the glejser test with the provisions of the
significance value of the independent variable > 0.05, the sample data does not have
heteroscedasticity problems. Based on the research sample data, the results of the
company size variable have a significance value of 0.901 > 0.05. The profitability
variable has a significance value of 0.342 > 0.05. The leverage variable has a
significance value of 0.917 > 0.05. Financial Distress variable has a significance value
of 0.118 > 0.05. So that it can be interpreted that each independent variable in the
sample data of this study does not occur heteroscedasticity problems in the regression
model.
Table 5. Autocorrelation Test

Source: Output data processed by the author, 2022

IJSOC © 2022
http://ijsoc.goacademica.com

333
International Journal of Science and Society, Volume 4, Issue 3, 2022

In this autocorrelation test using a run test with the provisions of the Asymp
value. Sig. (2-tailed) is greater than 0.05, so there is no autocorrelation problem in the
sample data. Based on the research sample data shows the results of the Asymp value.
Sig. (2-tailed) of 0.098 > 0.05. It can be interpreted that there is no autocorrelation
problem between independent variables in the sample data of this study, so that the
regression model is feasible and can be carried out.

3. Multiple Linear Regression Test

Multiple linear regression is a regression model that involves more than one
independent variable. Multiple linear regression analysis was carried out to
determine the direction and how much influence the independent variable had on the
dependent variable.
Table 6. Multiple Linear Regression Test

Source: Output data processed by the author, 2022

Based on the results of multiple linear regression analysis, the equation model
between variables is as follows: IPS = 6.676 +1.974CZ + 107.720PRT – 2.586LEV - 0.930FDS.
Which can be interpreted: The constant value is 6.676 which indicates that without the
influence of the independent variables on the Y variable (the area of voluntary
disclosure), the total Y variable is 6.676. The LN regression coefficient is 1.974, this
result shows that if there is one unit increase in the X1 variable (firm size), there will
be an increase in the Y variable (volunteer disclosure area) of 1.974. In terms of
voluntary disclosure, ROA has a regression coefficient of 107,720 which means it
indicates that if there is one unit increase in the X2 variable (profitability), there will
be an increase in the Y variable (the area of voluntary disclosure) of 107,720. The
regression coefficient is -2.586 for DER, this result shows that if there is one unit
increase in the X3 variable (leverage), there will be a decrease in the Y variable
(volunteer disclosure area) of -2.586. There is a negative relationship between ICR and
voluntary disclosure with a regression coefficient of -0.930. These results indicate that
if there is one unit increase in the X4 variable (financial distress), there will be a
decrease in the voluntary disclosure area of -0.930.

4. Hypothesis testing
The hypothesis is a provisional answer that must be tested. The test aims to
prove whether the hypothesis is accepted or rejected. The hypothesis serves as a
framework for researchers, provides work direction, and facilitates the preparation of
research reports.

IJSOC © 2022
http://ijsoc.goacademica.com

334
International Journal of Science and Society, Volume 4, Issue 3, 2022

Table 7. Coefficient of Determination Test

Model Summaryb
Std. Error
R Adjusted Durbin-
Model R of the
Square R Square Watson
Estimate
1 .537a .288 .239 7.79821 1.866
a. Predictors: (Constant), ICR, Company Size, DER, ROA
b. Dependent Variable: Voluntary Disclosure
Source: Output data processed by the author, 2022
Through the coefficient of determination test, the Adjusted 2 value is 0.239 or
23.9%, meaning that this value indicates that company size, profitability, leverage,
and financial distress affect the area of voluntary disclosure by 23.9%, the remaining
76.1% is influenced by other variables.
Table 8. F Statistic Test (Simultaneous)

Source: Output data processed by the author, 2022

The F statistic test (Simultaneous) has a measurement requirement, namely the
value of sig. the research ANOVA <0.05 and the calculated F value is greater than the
F table value, it can be interpreted that all independent variables have a simultaneous
effect on the dependent variable. Based on the research sample data, the results of the
sig. the research ANOVA is 0.000 <0.05 and the calculated F value is 5.866 > the F table
value is 2.528. So that it can be interpreted that company size, profitability, leverage,
and financial distress simultaneously affect the extent of voluntary disclosure.
Table 9. T Statistic Test (Partial)

Source: Output data processed by the author, 2022

The results of the T statistic test (partial) show that the significance value of the
firm size proxied by LN is 0.008 < 0.05, the t value is 2.764 > the t table value is 2,004,
and the beta coefficient value is 0.354 in a positive direction. That is, there is a
significant positive effect of firm size on the extent of voluntary disclosure. The results
of the T-test calculation show that the significance level of the profitability variable
proxied by ROA is 0.004 <0.05, and the t-count result is 3.001 > the t-table value of

IJSOC © 2022
http://ijsoc.goacademica.com

335
International Journal of Science and Society, Volume 4, Issue 3, 2022

2.004, and the beta coefficient value is 0.444 with a positive direction, so it can be
concluded that the profitability variable has a significant positive effect on the area
voluntary disclosure.
Leverage as proxied by DER proves that it partially has no effect on the area of
voluntary disclosure with the results of t count -1.096 > t table -2.004, sig value > 0.05
which is 0.278, and the beta coefficient value is 0.1555 in a negative direction. Financial
Distress proxied by ICR shows a significant negative effect on the extent of voluntary
disclosure where the results of t count -4.069 < t table -2004 and sig value 0.000 < 0.05,
and the beta coefficient value is 0.638 with a negative direction, so it can be concluded
that the financial distress variable has an effect on significant negative on the area of
voluntary disclosure.

5. Discussion
a. The Effect of Firm Size, Profitability, Leverage, and Financial Distress on
the Area of Voluntary Disclosure
Through hypothesis testing, it was found that firm size proxied by LN,
profitability as proxied by ROA, leverage as proxied by DER, and financial distress
proxied by ICR produced a simultaneous effect on the extent of voluntary disclosure
in the annual reports of companies in the consumer goods industry sector, then the
hypothesis The first accepted, volunteer.
Companies with higher profits will motivate management to convey
information properly (Rakiv, 2019). Because large companies face more demands
from the public for broad disclosure of information, company size can have an impact
on the level of voluntary disclosure (Putri, 2020). In the study (Putra et al., 2020)
explained that high leverage will make it difficult for companies to obtain funding
from external parties because investors are afraid of the company's inability to pay off
its debts so that companies do not disclose widely. According to (Pernamasari, 2020),
when the company is in an unhealthy financial condition (financial distress), the
company will tend to be more personal and provide limited information to avoid a
bad image in front of investors.
b. The Effect of Firm Size on the Area of Voluntary Disclosure
Through the results of the study, the size of the company calculated through
foreign countries has a significant positive effect on the extent of voluntary disclosure
in the annual reports of companies in the consumer goods industry sector. These
results are in line with the third research hypothesis which states that firm size has a
positive effect on the extent of voluntary disclosure. The same results are also found
in research (Nurudeen et al., 2019; Putra et al., 2020).
One way to carry out public accountability is to disclose more information,
especially in the annual report. Large companies get the resources to convey more
information and have more demands from the public because large companies have
more impact on society (Nurudeen et al., 2019). According to (Hariri, 2021) because
large companies are more visible in the capital market and the general public, the
pressure placed on these companies to provide more disclosure is significantly higher.
IJSOC © 2022
http://ijsoc.goacademica.com

336
International Journal of Science and Society, Volume 4, Issue 3, 2022

c. Area of Voluntary Disclosure

The third hypothesis states that profitability as proxied by ROA has a positive
effect on the extent of voluntary disclosure in the annual reports of companies in the
consumer goods industry sector. The results of the study prove that there is a
significant positive effect of the profitability variable on the extent of voluntary
disclosure, thus the third hypothesis is accepted. The results of this study are in line
with the results of research (Rakiv, 2019) and (Dahiyat, 2020).
According to (Dahiyat, 2020), the high profit generated by the company is an
indication that the company has promising prospects and good financial performance
in the eyes of investors so that the company will disclose extensive information in the
annual report. (Pernamasari, 2020) asserts that a high profitability ratio will encourage
companies to disclose wider information in their annual reports because the market
judges companies that disclose more information to have good performance.
d. The Effect of Leverage on the Area of Voluntary Disclosure
In the fourth hypothesis, the statement that leverage has a negative effect on
the area of voluntary disclosure is rejected because research proves that there is no
significant effect of the leverage variable on the area of voluntary disclosure in the
annual reports of companies in the consumer goods industry sector. The results of
this study are in line with research results (Dahiyat, 2020; Pernamasari, 2020).
This shows that companies with low or high DER values do not necessarily
make extensive voluntary disclosures in annual reports or it is stated that high and
low leverage will not affect the company's voluntary disclosures every year
(Pernamasari, 2020). Information about the company's ability to manage debt sourced
from equity does not become pressure to convey wider information by the company's
management (Dahiyat, 2020).
e. The Effect of Financial Distress on the Area of Voluntary Disclosure
The last hypothesis explains that financial distress as proxied by ICR has a
negative effect on the extent of voluntary disclosure in the annual reports of
companies in the consumer goods industry sector. Through the results of the
regression hypothesis test, it proves that there is a significant negative effect of the
financial distress variable on the extent of voluntary disclosure, so the fifth hypothesis
is accepted. The results of this study are in line with research (Pernamasari, 2020)
which states that there is a negative effect of the financial distress variable on the
extent of voluntary disclosure.
(Pernamasari, 2020) states that when a company is in a financially depressed
condition (bad news), management will tend to provide limited information, which
indicates a negative signal for investors so that this will affect the transparency of
management in making disclosures. In accordance with the signal theory, if the
company is in good health, it means that the company has good news where the
company will be more open in providing information to investors so that this will
affect the openness of management in providing information.

IJSOC © 2022
http://ijsoc.goacademica.com

337
International Journal of Science and Society, Volume 4, Issue 3, 2022

E. CONCLUSION
From the results of the study, it can be concluded that company size as proxied
by LN, profitability as proxied by ROA, leverage as proxied by DER, and financial
distress proxied by ICR simultaneously affect the extent of voluntary disclosure of
consumer goods industry companies listed on the Indonesia Stock Exchange (IDX) for
the period 2018-2020. Partially, firm size and profitability have a positive effect on the
area of voluntary disclosure, leverage has no effect on the area of voluntary disclosure,
and financial distress has a negative effect on the area of voluntary disclosure.
The limitation of this research is the research variable, namely the researcher
only uses the company's internal factors such as the financial condition obtained from
financial ratios. In addition, this study only uses the financial data of consumer goods
industry companies for a period of 3 years (2018-2020), so the research findings are
only limited to that scope. It is hoped that further researchers will further expand their
analysis using different samples and industrial sectors and add other independent
variables such as one of the corporate governance variables, namely the audit
committee because the presence of the audit committee strengthens the principles of
transparency and responsibility in implementing corporate governance which
requires companies to be more transparent and convey complete information.
Based on this research, suggestions for potential investors and investors to be
more careful and think critically before taking steps to invest and make decisions by
assessing financial condition through information published by the company, are also
expected to be a motivation for management to make improvements in terms of
voluntary disclosure in the report. annually in order to provide broad information for
potential investors and instill investor confidence in the company.

REFERENCES
1. Abadi, K., Purba, D. M., & Fauzia, Q. (2019). The Impact of Liquidity Ratio, Leverage
Ratio, Company Size and Audit Quality on Going Concern Audit Opinion. Jurnal
Akuntansi Trisakti, 6(1), 69–82.
2. Albawwat, A. H., Shubita, M., & Alomari, M. (2019). The Association Between the
Voluntary Disclosure of Interim Reports and Company Characteristics in Jordan.
European Journal of Business and Management, November.
3. Anwar, M. (2019). Dasar-Dasar Manajemen Keuangan Perusahaan. Kencana.
4. Arifin, A. Z. (2018). Manajemen Keuangan. Zahir Publishing.
5. Banupriya, K. (2018). Mandatory and Voluntary Disclosure of Indian Companies-a
Study With Reference To Investors in Chennai Region. 2, 323–325.
6. Dahiyat, A. A. (2020). Determinants of Voluntary Disclosure Quality in Jordan:
Evidence From Manufacturing Companies Listed in Amman Stock Exchange. Academy of
Accounting and Financial Studies Journal, 24(5), 1–11.
7. Farras, F., & Faisal. (2020). The Influence of Good Corporate Governance and Voluntary
Disclosure on Information Asymmetry. Diponegoro Journal of Accounting, 9(4), 1–13.

IJSOC © 2022
http://ijsoc.goacademica.com

338
International Journal of Science and Society, Volume 4, Issue 3, 2022

8. Hariri, M. (2021). Structure of Integrated Reporting, Voluntary Disclosure and

Firm-Specific Characteristics in Saudi Arabian Companies. International Journal of
Business and Management, 16(10), 73.
9. Harventy, G. (2020). The Role of Corporate Governance Improving Voluntary
Disclosure. Jurnal Reviu Akuntansi Dan Keuangan, 10(3), 602–613.
10. Hery. (2016). Analisis Laporan Keuangan. PT Gramedia Widiasarana Indonesia.
11. Husna, A., & Satria, I. (2019). Effects of Return on Asset, Debt to Asset Ratio,
Current Ratio, Firm Size, and Dividend Payout Ratio on Firm Value. International
Journal of Economics and Financial Issues, 9(5), 50–54.
12. Indrati, M., & Amelia, K. (2022). The Effect of Profitability, Liquidity, Leverage and
Company Size on the Company’s Dividend Policy. Budapest International Research
and Critics Institute-Journal (BIRCI - Journal), 5(August).
13. Indrati, M., & Handayani, R. (2022). The Effect of Good Corporate Governance on
Financial Distress. Fair Value: Jurnal Ilmiah Akuntansi Dan Keuangan, 4(10), 4726–
4732.
14. Indrati, M., & Putri, E. (2021). Effect of Current Ratio, Net Profit Margin, Debt
Equity Ratio, Return on Equityon Financial Distress. American International Journal
of Business Management (AIJBM), 4(10), 33–40.
15. Isti, F., & Purwaningsih, E. (2022). The Effect of Capital Structure, Liquidity, Company
Size, and Inventory Turnover on Profitability, 5(2), 95–105.
16. Jayanti, F. D., Daat, S. C., & Andriati, H. N. (2019). Pengaruh Karakteristik
Perusahaan dan Profitabilitas terhadap Kelengkapan Pengungkapan Sukarela
dalam Laporan Tahunan. Jurnal Akuntansi & Keuangan Daerah, 14(2), 103–111.
17. Jensen, M. C., & Meckling, W. H. (1976). Theory of the Firm: Managerial Behavior,
Agency Costs and Ownership Structure. Journal of Financial Economics 2, 72(10),
305–360.
18. Juhandi, N., Fahlevi, M., Abdi, M. N., & Noviantoro, R. (2019). Liquidity, Firm Size
and Dividend Policy to the Value of the Firm (Study in Manufacturing Sector
Companies Listed on Indonesia Stock Exchange). 100(Icoi), 313–317.
19. Krisdayanti, A., & Wibowo, S. S. A. (2019). The Effect of Voluntary Disclosure on
Firm Performance. 354(iCASTSS), 317–320.
20. Lambey, R. (2021). The Effect of Profitability, Firm Size, Equity Ownership and
Firm Age on Firm Value (Leverage Basis): Evidence from the Indonesian
Manufacturer Companies. Archives of Business Research, 9(1), 128–139.
21. Lumapow, L. S. (2018). The Influence of Managerial Ownership and Firm Size on
Debt Policy. International Journal of Applied Business and International Management,
3(1), 47–55.
22. Masdupi, E., Tasman, A., & Davista, A. (2018). The Influence of Liquidity,
Leverage and Profitability on Financial Distress of Listed Manufacturing
Companies in Indonesia. 57(Piceeba), 223–228.
23. Nurudeen, S. O., Ahnda, M. I., & Shalli, A. M. (2019). Effect of Coporate
Characteristics on Voluntary Disclosure of Listed Financial Service Firms in
Nigeria. Amity Journal of Corporate Governance, 3(2), 29–41.
IJSOC © 2022
http://ijsoc.goacademica.com

339
International Journal of Science and Society, Volume 4, Issue 3, 2022

24. Pernamasari, R. (2020). Determinants of Voluntary Disclosure: Based on Financial

Ratios and Financial Distress. International Journal of Management Studies and Social
Science Research, 2(4), 130–141.
25. Purwaningsih, E., & Safitri, I. (2022). Pengaruh Profitabilitas, Likuiditas, Leverage,
Rasio Arus Kas dan Ukuran Perusahaan terhadap Financial Distress. Jurnal
Akuntansi dan Ekonomi, 7(2).
26. Puspasari, M. A., & Rahmah, A. S. M. (2018). Analisis Faktor-Faktor yang
Memengaruhi Luas Pengungkapan Sukarela (Voluntary Disclosure) Dalam
Laporan Tahunan. CAKRAWALA-Repositori IMWI, 1(2), 53–71.
27. Putra, W. E., Kusuma, I. L., & Dewi, M. W. (2020). Firm Characteristic, Ownership
Structure and Voluntary Disclosure: A Study of Indonesian Listed Manufacturing
Firm. 28(1), 386–399.
28. Putri, Y. G. (2020). The Influence of Financial Distress, Company Characteristic
and Corporate Governance on Voluntary Disclosure in an Annual Report.
Accountability, 9(2), 84.
29. Rakiv, M. (2019). Firm- Specific Characteristics and Voluntary Disclosure
Reporting: An Empirical Research on Listed Companies of Bangladesh. Journal of
Accounting Finance and Auditing Studies (JAFAS), 5(1), 298–317.
30. Reskika, N., & Wahyudi, I. (2021). The Effect of Company Size, Profitability, Audit
Committee on Audti Delay with Public Accounting Firm. Hirarki: Jurnal Ilmiah
Manajemen dan Bisnis, 03(03), 418–441.
31. Sallehuddin, R. M., & Rosli, N. A. M. (2019). Corporate Governance and Voluntary
Disclosure: Empirical Studies the Public-Listed Companies in Bursa Malaysia.
American International Journal of Business Management (AIJBM) ISSN, 2(10), 30–36.
32. Siswanto, E. (2021). Manajemen Keuangan Dasar. Universitas Negeri Malang.
33. Spence, M. (1973). Editorial: Aktuell Diskutiert. The Quarterly Journal of Economics,
87(4), 419.
34. Suripto. (1999). Pengaruh Karakteristik Perusahaan terhadap Luas Pengungkapan
Sukarela dalam Laporan Keuangan Tahunan. Simposium Nasional Akuntansi II.
35. Tsaqif, B. M., & Agustiningsih, W. (2021). Pengaruh Financial Distress dan Ukuran
Perusahaan terhadap Manajemen Laba dengan Kepemilikan Manajerial sebagai
Variabel Moderasi. Jurnal Akuntansi dan Governance, 2(1), 53.

IJSOC © 2022
http://ijsoc.goacademica.com

340