Elshandidy et al thus bring into picture the impact of information asymmetry on the results of various scenarios put forth by existing theories of risk disclosures (pp. 327). The context of including mandatory disclosures as a part of this expansion is drawn from existing studies in regulatory theory (Dobler, 2008; Leftwich, 1980; Ogus, 2001), while the context for the incentives involved in voluntary risk disclosures is drawn from agency theory (Abraham et al, 2007; Jensen et al, 1976). Various findings reported in studies related to signaling theory (Akerlof, 1970; Spence,1973;Watson et al, 2002) and the Capital Asset PricingModel (CAPM)(Bowman, 1979; Chiouet al, 2007; Hamada, 1972) have also been extensively factorized in the development of the evaluation model.
The statistical model conceptualized and developed in this paper is an empirical model based on two significant levels (pp. 326). The first stage, modeled as a one-way ANOVA with random effects, is the null hypothesis, also called the unconditional random-effect model. This model was used to quantitatively define and qualitatively evaluate the impact of industry and financial conditions of that respective year separately on various aggregated, voluntary and mandatory risk disclosures taken up by the company. This model being the null hypothesis was thus shown to appropriate to be used as a baseline model (BM). The second stage is the full or unconditional model, in turn, makes use of the evaluations made by the null hypothesis to incorporate all the independent variables.