Capital Management Determinants of Financial Instrument Disclosures in the Extractive Industries: Evidence from Australian Firms

The extractive mining, oil and gas industries are of major global economic importance. Given the capital-intensive nature of the extractive industry, resource firms commonly seek access to domestic and international financial markets to fund the acquisition of assets or entities or to provide working capital for current operations and new project developments. In such a situation, it is expected that capital management considerations will have a bearing on the financial disclosure policy decisions of extractive resource firms through the potential impact on a company’s cash flow, payment of dividends, capacity to service debt and meet financial covenant constraints, maintenance or improvement of credit ratings, exposure to risk and to retain flexibility to pursue attractive investment opportunities including acquisitions. Resource firms may utilise specific financial instruments to achieve a target capital structure and cost of capital and thus to optimise financial returns to stakeholders (Botosan, 1991).