1. Ana Cristina Hirata Barros Research / Operations Analyst Europe and Central Asia Region THE WORLD BANK Public Availability of Financial Statements by Non-listed Companies

2. Research Questions Should the World Bank support the mandatory disclosure of financial statements for non-listed companies? If so, what considerations should be taken into account when formulating mandatory disclosure policies?

3. Organization Based on literature review Arguments for and against mandatory disclosure of financial statements of nonlisted companies. Part I: Theoretical Part II: Empirical Based on survey data (39 countries) Legal disclosure requirements Enforcement mechanisms and compliance rates

4. Part I Arguments for and against public disclosure of financial statements by non-listed firms. Mandatory vs. voluntary disclosure Country considerations to be taken into account when considering a mandatory disclosure policy for non-listed firms.

5. Part II How are financial statements made public (e.g., filed in a public registry, published in a newspaper/ official gazette, etc.) What information is included in the financial statements (e.g., explanatory notes, audit report) How are requirements enforced (sanctions), what is capacity of enforcement body, and what are compliance rates

6. Part II: Sample Brazil, Canada, Chile, Dominican Republic, Jamaica, Mexico United States Austria, Belgium, Croatia, Denmark, Estonia, France, Germany, Italy, Norway, Poland, Russia, Serbia, Turkey, UK Egypt, Israel, Jordan, Tunisia Australia, New Zealand China, India Indonesia, Japan, Kazakhstan, Korea, Malaysia, Philippines, Sri Lanka Kenya, Mauritius, Nigeria, Senegal South Africa

7. Initial Findings……

8. Arguments in favor of public disclosure by non-listed firms: Enhancement of Corporate Governance Protects third parties and the public (e.g. creditors, suppliers, employees, etc.) Improves the allocation of resources Disclosure acts as a “report card” on management’s activities. Part I

9. Arguments in favor of mandatory (vs. voluntary) public disclosure by non-listed firms: Financial information = public good (would be under-produced). Reluctance to disclose unfavorable information. Standardization of financial information  enhanced consistency and comparability Mandatory disclosure levels the playing field among businesses. Part I

10. Arguments against public disclosure by non-listed firms: Costs outweigh the benefits of financial disclosure Lack of timeliness of financial statements Lack of usefulness of information contained in financial for decision making. Part I

11. Policy Considerations Legal environment and other corporate governance safeguards Enforcement capacity Status quo and interest group entrenchment Level of debt v. equity financing Quality of accounting standards and practices, as well as quality of accounting standard enforcement mechanisms Part I

12. Part II: Initial Survey Responses Responses ReceivedPending Responses Belgium Brazil Canada Chile China Egypt Estonia Indonesia Kenya Korea Malaysia Mauritius N. Zealand Nigeria Norway Philippines Poland Senegal Sri Lanka Turkey UK Australia Austria Croatia Denmark Dominican R. France Germany India Italy Jamaica Japan Kazakhstan Mexico Russia Serbia South Africa Tunisia USA Part II

13. Public Disclosure for Non-listed Companies: Scope of Requirement Part II Countries with No Disclosure RequirementAllSize Countries with Public Disclosure Requirement Legal FormOther *n=19

14. Audit Requirements for Non-listed Companies: Scope of Requirement Part II No Audit RequiredAudit RequiredAllSizeOther *n=19

15. Filing Methods for Non-listed Companies Part II *n=12

16. Relevance of Financial Statements: Required components Part II *n=12

17. Timeliness of Financial Statements: Consolidated and Legal Entity Accounts Part II *n=11

18. Research paper will be available for review in June/July 2006. We look forward to presenting our final findings at that time. Thank you