Determinants of employment benefits disclosure in Baltic companies’ financial statements

Abstract

This study investigates the extent and determinants of employee benefits disclosure in the financial statements of companies listed on the Baltic Stock Exchange (Lithuania, Latvia, and Estonia) during the period 2019–2023. Given the significance of employee-related costs and the obligations imposed by IFRS—particularly IAS 19, IAS 24, and IFRS 2—the research aims to assess how comprehensively companies comply with these standards and which determinants influence their reporting practices. The study uses a structured disclosure checklist and constructs an information disclosure index (IDI) based on the presence and completeness of required disclosures. Data were collected from 14 companies in the consumer goods and utilities sectors. The average IDI was found to be 73.89%, indicating a medium level of disclosure, with notable variation across companies and countries.

Using multivariate panel regression, the study identifies company size, financial leverage, and sector as statistically significant determinants of disclosure. Larger companies tend to disclose less, while firms with higher leverage disclose more. Companies in the utilities sector provide more comprehensive disclosures than those in consumer goods. Profitability, audit firm (Big4), and corporate governance variables (board size and independence) did not show significant influence. The findings partially align with international literature but diverge in key areas, especially regarding the non-significance of profitability and auditing by Big4 in the Baltic context.

The regression model explained approximately 29% of the variation in disclosure levels. The study also confirms that inconsistencies in reporting may stem from differences in economic conditions, industry characteristics, and institutional pressures across regions. The research offers practical implications for regulators, auditors, investors, top managers of the companies, and financial statement preparers, urging stricter enforcement and deeper understanding of IAS/IFRS requirements. It also highlights the need for future research in similar fast-developing markets using broader datasets and additional explanatory variables.