In accounting, debt/equity hypothesis predicts that the higher the firm’s debt/equity ratio, the more likely managers use an accounting method that increases income. The higher the debt/equity ratio, the closer the firm is to the constraint in the debt covenants. Hence, ceteris paribus, the larger a firm’s debt/equity ratio, the more likely the firm’s manager is to select accounting procedures that shift reported earning from future period to the current period (Watts & Zimmerman, 1990). It is argued that when a firm is making a large use of debt, a monitoring problem arises between stockholders and creditors. Thus, the involved firms may solve this problem by increasing the level of voluntary disclosure (Al Arrusi et al, 2009). Zarzeski (1996) supports this view by saying that firms with higher debt ratio are more likely to share private information with their creditors; thus voluntary disclosures can be expected to increase with leverage.