Date of Award


Degree Type


Degree Name

Bachelor of Business Honours


Faculty of Business

First Advisor

Theo Christopher


The purpose of this study is to investigate the economic incentives of firms to voluntarily disclose cash flow information prior to the operation of the approved standard AASB 1026 Statement of Cash Flows in 1992. This study theorises that firms voluntarily disclose such financial information because they believe that (1) the cash flow information is useful and relevant (in addition to information in income statement, balance sheet and funds statement), and (2) by voluntarily disclosing cash flow information, it will reduce the agency cost and the political cost. A review of contracting theory and the literature on voluntary disclosure identified the possible determinants as firm size, ownership control status, leverage, political sensitivity, proportion of assets in place, exchange listing, and subsidiary relationship. The relationship between these possible determinants and the disclosure policy of 172 firms - 18 in the treatment group and 154 in the control group- as listed on the Australian Graduate School of Management (AGSM) Annual Report Microfiche File for the year 1990, was tested using both univariate tests (parametric and non-parametric) and multivariate analyses. Based on univariate statistical tests performed, the incidence of voluntary disclosure of cash flow information is related to: (1) firm size, (2) foreign exchange listing, and (3) proportion of assets in place, and moderately related to (4) financial leverage of a firm. The decision appears to be unrelated to (5) whether a firm's shares were widely held, (6) market concentration ratio, (7) profitability ratio, and (8) whether a firm is a subsidiary of a foreign parent in Canada or New Zealand or the USA. Furthermore, multivariate analysis reveals that the eight independent variables significantly explain 52.4% (R2 of OLS regression) of the variations in the firms' decisions to voluntarily disclose cash flow information.