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Corporate information disclosure in capital markets of Nepal

Narayan Paudel
Assistant, Securities Board of Nepal
Jul 03, 2019
Corporate information disclosure in capital markets of Nepal


Capital markets are markets for long term funds having maturity greater than one year. They are vital for long term growth and prosperity of economy since they provide channel through which needed fund can be raised. It is the mechanism through which public savings are channelized to industrial and business enterprises. Capital markets institutions are engaged in mobilization of saving surplus units to deploy funds into deficit units for productive investment. The key instruments used in the capital markets are debt, common stock, preferred stock, bonds and convertibles.

The history of capital markets is not too long. The systematic and organised development of capital markets is a recent phenomenon in Nepal. Despite being the major component of capital markets, securities markets does not seem that developing. The history of securities markets began with the floatation of shares by Biratnagar Jute Mills Limited and Nepal Bank Ltd. in 1937. Introduction to Company Act in 1964, the first issuance of Government Bond in 1964 and the establishment of Securities Exchange Center (SEC) Ltd. in 1976 were other significant development in capital markets.

Securities Board of Nepal (SEBON) was established by the government of Nepal on June 7, 1993 as an apex regulator of securities marketss in Nepal. It has been regulating the markets under the Securities Related Act, 2006. According to the Securities Exchange Act, 1983, each and every company wishing to transact their shares in the markets must list their shares in the stock exchange but listing the government securities is not required. To provide the liquidity and marketsability to the corporate securities, corporate bodies or the companies list their securities in the NEPSE. Presently, there are 196 listed companies listed their securities in the NEPSE.

As known, the securities of corporate bodies and companies are issued and transacted in the securities markets. To make the securities markets transparent and efficient, those companies are required to disclose the information regarding their business affairs to  the securities markets and other participants of the securities markets. It is also the legal obligation for the companies to make the information disclosure to their shareholders and other users of the information. Such information disclosure is made for both primary issue markets and secondary issue markets. Companies disclose its information through prospectus and press releases to the primary markets and through periodic financial statement and annual report to the secondary markets.

Corporate Information Disclosure

Corporate Information Disclosure as any deliberate release of information, whether numerical or qualitative, required or voluntary or via formal or informal channels. (Gibbins & Waterhouse, 1990) Corporate disclosure is the principal mean by which companies can become transparent, and is critical for the functioning of an efficient capital markets. (Healy & Palepu, 2001) Disclosure is the principal mean by which companies can be transparent. (Solomon, 2007) Mandatory Disclosures were limited to providing essential financial or non-financial information in compliance to disclosure regimes. (Owusu-Ansah, 1998) Disclosure Standard implies to any kind of reliable information disclosed to the users of information especially to shareholders and other interested investors. (Shrestha, 2005) Corporate information disclosure is making information available with the publication of economic information related to business enterprises. It is a purposeful release of information by the corporate to facilitate the investors and other stakeholders so that they could make rational investment decision when required. In another term, corporate information disclosure is releasing the company’s financial and non-financial information completely, accurately, and timely to all the stakeholders. It is the principle of reporting financial and non-financial information through brochures, prospectus, annual reports, financial press release, interim reports, publications, economic reports, conducting annual general meeting and so on mainly to protect the interest of an investors and other stakeholders from fraud, misrepresentation and deception like that of giant companies Enron, K mart Global Crossing etc.

Corporate Information Disclosure Practices in Nepal

Corporate information disclosure is an emerging concept in Nepal. Some efforts have been made for building regulatory framework for such disclosure but the practice is still in its initial phase due to lack of strong regulatory mechanism and unclear direction. On the basis of nature of transactions, the markets has been divided in our country that is money markets and capital markets. So, the system of information disclosure is governed by their respective governing body in Nepal. The banking system of Nepal is governed by the Nepal Rastra Bank (NRB) and through its several directives the transparency of information is maintained. Now Nepal Financing

Reporting System (NFRS) for Bank and Financial Institution has been implemented as the Accounting Standards .Similarly, SEBON is responsible for handling the practice of corporate information disclosure of the participants of capital markets. Moreover, the disclosure regimes applicable to banks and financial institutions in Nepal comprised of the accounting standards issued by Accounting Standard Board (ASB) of Nepal, requirements of Security Board of Nepal based on Securities Related Act 2006, provisions of Company Act 2006, Banks and Financial Institutions Act 2006 (BAFIA), listing requirements of NEPSE and directives of Nepal Rastra Bank. (Sharma, Disclosure Regime for Mandatory Disclosures by Banks and Financial Institutions in Nepal, 2013)

As stated above, SEBON is an apex regulator of capital markets where the participants of this markets need to be abided by the rules and must fulfill all the requirements of  the regulatory body. Among those requirements, corporate information disclosure is one of the requirements of the regulator of capital markets where all the listed companies have to disclose the required information on time. The Securities and Registration Act 2063, Chapter 7 section 26 has made following provisions for listed companies regarding corporate information disclosure. (Securities Registration and Issue Regulations, 2073)

Annual report must be submitted within the five months from the end of financial year.

Quarterly report must be submitted within thirty days from the end of each quarterly period.

Information about the agenda of general meeting prior to annual general meeting and decisions of annual general meeting need to be given to the Board within thirty days of conclusion of general meeting.

Information about events and transactions that might affect the markets price of security must be informed to the Board within three days of such occurrence.

Any information, statements, records must be provided by the participants of capital markets on demand of Board at any time.


Since the status of corporate information disclosure did not come out to be good therefore SEBON need to be bringing stricter policies. The SEBON needs to form a group/team or if possible different department for the information disclosure checking of listed companies which ensures the good corporate information disclosure and hence uplift the capital markets of Nepal. In order to improve disclosure practice immediately, SEBON need to ask government to pass the rules and regulations to make compulsory for the listed companies to upload their annual reports on their websites. If they do not comply with this rule, then strict penalty must be levied to them compulsorily without any excuse. The immediate benefit will be mainly to investors, the listed companies and the regulatory bodies. The investors will get chance to easily access the statements of listed companies in order to make the investment decisions. Similarly, the companies will be deemed more reliable and transparent and due to these qualities attracts the investors to invest in the shares of that particular company and hence the price of a share will be high as demand increases of  that company.  And finally, the regulatory bodies like SEBON, they will become more efficient and effective to make other follow the rules and regulations of the organisation. After all the capital markets of Nepal will be developed and our companies could also be listed in foreign stock marketss.

Implication Plan

Since, SEBON have the rules and regulations regarding non compliance of disclosure practices of listed companies but the implementation are the most that is lacking. But SEBON is also lacking the precise rules for the disclosure practices. SEBON must make different department to check the disclosure practice by listed companies if possible but if not then at least SEBON can form a team to check the disclosure practices by listed companies in Nepal. This step to some extent can improve the disclosure practice of Nepal and hence develop the capital marketss to become transparent.

Similarly, SEBON should regularly educate the corporate bodies on the information disclosure issues. Besides, investors should also be educated on information disclosure issues. It can be done by organising workshops and seminars on corporate information disclosure and through other media and publications.

In the same way, the quality and quantity of informational items in the annual reports of the companies should be increased by corporate bodies themselves and regulatory bodies should encourage and enforce the corporate bodies in making disclosure adequate. In order to encourage corporate to comply with disclosure practice, SEBON can use measures like rewarding the companies, which disclose the best and quality information.

The main implementation plan in order to improve the corporate information disclosure practices are as follows.


Short Term

The short term plans mean the step that SEBON can undertake within six months. These plans are very minor steps that can be taken by SEBON in order to improve the disclosure practices in Nepal.

Creating awareness among public about significance of corporate disclosure

The first and foremost task of SEBON is to create awareness among the public about the importance of corporate disclosure. If the users of information of companies are well aware about the disclosure, then they will be benefitted while investing. As a whole, stakeholders of financial markets should be made aware about the significance of corporate information disclosure by SEBON immediately.


Publishing non deterrence reports in public

SEBON could monitor the disclosure practice of the  listed  companies  and then publish the report in media explicitly mentioning the name of those listed companies who are not submitting report on time. Along with this report, SEBON can make aware the investors or general people about the corporate disclosure and its importance. This step taken by SEBON would compel listed companies to submit their annual reports on time and not include on the list that is published in public media.

Reducing red tape

In order to encourage listed companies to improve their disclosure practices, SEBON should simplify the procedures of disclosure. For instance, there is     no provision of submitting annual reports through online or soft copy. This regulation can be amended and companies must be allowed to submit their annual reports digitally on time. One the one hand, it will increase the cost to SEBON to create database whereas on the other hand, it will save time of the companies comparatively when submitted to the SEBON office.

Different platform for disclosure to different level of companies

SEBON should not provide the same disclosure regulations to companies of all sectors. Since, there are higher, middle and lower level companies in different sectors, so SEBON should ease the way to disclose their information differently according to the level of the companies. For instance, small microfinance won’t be able to disclose same information as disclosed by the commercial banks. The requirements must also be according to the levels of the listed companies.

Medium Term Plans

The medium term plans can be implemented by SEBON within one to two years because it might seek the approval from the government. And also these plans cannot be implemented immediately, for implementation some work and study is necessary.

Combining tax regime and disclosure practice

SEBON should combine the tax regime and disclosure practice in order to improve the disclosure practice in Nepal. SEBON should make provision that those companies who do not comply with information disclosure rule must pay additional percentage of tax to the government as a penalty. This would encourage companies to comply with the disclosure rule of SEBON.


Harmonizing accounting standards

SEBON should make disclosure rules considering all the international standards like International Financial Reporting System, International Accounting Standards, NFRS etc. Following these standards would make the disclosure practice easy as well as recognized by the international level as well. This will uplift the disclosure practice of listed companies in Nepal.

Having a regulation requiring public director at large on board

The main work of public director in any company is to put the words in the  best interest of public/shareholders in management team. If the public director is appointed at large on board than that individual will speak for the rights of the public. Hence, that director will pressurize for information disclosure so that the companies’ image won’t go down and the investors’ confidence on the company will go up and finally price of share rises up.

Long Term Plan

The long term plan must be implemented within couple of years. This plan is not very easy to implement because in order to implement his plan good exercise is necessary.


SEBON must be able to make a framework of delisting those companies who are not following the disclosure rule for a long time. Simply delisting company is also not good because the investors will be directly hampered so that must be considered as well. Therefore, after making a good framework, delisting provision can be made to those companies who are not disclosing their information.

If one fails to submit such financial and transaction related statements and information related with AGM as required to be submitted to the Board, then license may be revoked by SEBON with using Securities Act (2063).


As an apex regulatory body of capital markets of Nepal SEBON is playing vital role to improve the current scenario of corporate information disclosure. SEBON has to regulate many listed companies as well as markets participant by giving them strict guidelines and direction as per the regulatory frame work because there are very minimum listed companies who submit their annual as well as quarterly reports to SEBON regularly and conduct the AGM and inform it about to SEBON. However now after the NFRS there is the hope of transparent financial statement and reporting standards that represents the actual image of the company. Insider trading regulation is also a challenge that affects the markets. Therefore for the improvement of over all current scenario of the capital markets of Nepal all the markets participant has to become equally liable and transparent in order to protect investor right.


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Healy,P.M.,& Palepu, K.G.(2001).Information asymmetry, corporate disclosure,  and  the capital markets: A review of the empirical disclosure literature. Journal of Accounting and Finance.

Jensen,M.,& Meckling,W.(1976).Theory of the firm: Managerial behaviour, agency costs and ownership structure. Journal of Financial Economics.

Massen, G.F., Bosch ,F.A.,Henk,V.(2003). The importance of disclosure in corporate governance self-regulation.

Annual Report of SEBON; FY 2017/18 Securities Act 2063