The disclosure index of small private companies in Malta

Abstract

PURPOSE: This dissertation aims to address the research gap surrounding the disclosure practices of small entities particularly in small jurisdictions like Malta, by delving into the average disclosure index (DI) of small private entities in Malta, shedding light on how compliance with GAPSME disclosure requirements increased from 2017 to 2021. The study has two objectives. First, to determine if small entities have learned to comply better with GAPSME disclosure requirements from 2017 to 2021 and to gain insight into key DI elements. Secondly, to investigate whether listed, large, and medium-sized entities’ compliance factors also impact small entities’ compliance. DESIGN: This research adopted a mixed methodology approach. Quantitative research analysis was used to determine whether a learning process in compliance was present in the financial statements of entities from 2017 to 2021. The qualitative techniques aimed to gain further insight on the DI and whether characteristics affecting larger entities’ compliance also influence small entities’ compliance with GAPSME disclosure requirements. FINDINGS: The author finds a learning curve in the compliance with GAPSME disclosure requirements from 2017 to 2021. Additionally, it was clear from the semi-structured interviews, that not all factors impacting the level of compliance of listed, large, and medium-sized entities are perceived to also impact the level of compliance of small entities with the relevant financial reporting regulatory Framework. CONCLUSION: The implementation of the GAPSME framework in Malta has led to increased compliance with disclosure requirements compared to its initial stages. However, full compliance is still lacking, indicating the need for further progress. To enhance compliance, local enforcement bodies should prioritise education and training initiatives to change professionals’ attitudes towards compliance. Additionally, more research on small entities is needed to recognise their significance in the market and in literature. VALUE: This study aims to equip various stakeholders, including the Accountancy Board, Malta Institute of Accountants, and local professionals, with valuable insights on the level of adherence to GAPSME disclosure requirements and the key elements that influence compliance. The objective of this study is to increase the understanding of relevant stakeholders on the areas in the GAPSME framework that are repeatedly non-complied with and had a lack of improvement in compliance throughout the years since GAPSME implementation and how this may be amended.