Accounting Disclosure Practices and Investor Protection in Emerging Markets

Abstract

This research investigates the complex relationship between accounting disclosure practices and investor protection mechanisms in emerging markets through a
novel methodological framework that integrates computational linguistics, network
analysis, and institutional theory. Unlike traditional studies that rely on static
disclosure indices, this paper introduces a dynamic, multi-dimensional assessment
model that captures both the quantity and qualitative characteristics of financial
disclosures across 47 emerging economies from 2010 to 2023. Our methodology
employs natural language processing techniques to analyze over 500,000 corporate
reports, extracting not only compliance metrics but also semantic patterns, readability scores, and forward-looking statement frequencies. We develop an original
Investor Protection Efficacy Index (IPEI) that incorporates both formal legal protections and their practical enforcement, addressing a significant gap in existing
literature. The findings reveal several counterintuitive relationships: first, that
increased disclosure volume does not necessarily enhance investor protection when
information complexity exceeds investor processing capacity; second, that the effectiveness of disclosure practices depends critically on the interaction between formal
institutions and informal norms; and third, that emerging markets exhibit distinct
disclosure clusters that transcend geographical boundaries. Our analysis demonstrates that the most effective investor protection regimes combine moderate disclosure requirements with strong enforcement mechanisms and investor education
programs. The research contributes to the literature by providing a more nuanced understanding of how disclosure practices function within the institutional
ecosystems of emerging markets, offering policymakers a framework for designing context-sensitive regulatory approaches that balance transparency objectives
with implementation feasibility. This study represents a significant departure from
conventional disclosure research by emphasizing the systemic interdependencies between accounting practices, institutional environments, and investor behavior