Regulatory requirements and board composition

International Journal of Managerial and Financial Accounting, 2010

The board of directors is an important entity in a company, creating a link between shareholders and managers and therefore playing an important role in the governance of a firm. This study focuses on board structure and the extent of the corporate governance statement disclosure. This study found that the size of the corporate board does have some influence on the extent of the corporate governance statement disclosure. It is quite surprising to find that the rest of the variables involving the board structure do not have any association with the extent of corporate governance statement.

Journal of Governance and Regulation, 2021

Purpose -The aim of the paper is to examine the linkages between board ownership, audit committees' (ACs) effectiveness in terms of the proportion of independent non-executive directors (INED) and expert members on the AC and corporate voluntary disclosures. Design/methodology/approach -The paper is based on a sample of 124 public listed companies in Malaysia for studying differences in corporate governance characteristics which affect the financial disclosure. Findings -The empirical results indicate that board ownership is associated with lower levels of voluntary disclosures. The result is consistent with the notion that board ownership increases agency costs resulting from information asymmetry between firm management and outsider investors. The negative relationship between board ownership and corporate voluntary disclosure is, however, weaker for firms with higher proportion of INED on the AC indicating that INED moderate board ownership/corporate voluntary disclosure relationship. Overall, the findings lend support for firms with a higher level of board ownership to include more independent directors on the AC to increase disclosure levels and reduce information asymmetry between firm management and investors. Originality/value -The paper demonstrates the usefulness of corporate governance factors mainly board ownership and effective AC on financial reporting practices. It is expected that this research will have important policy implication to reduce information asymmetry and improves corporate governance.

Australian Accounting Review, 2017

Using published data from the top 166 ASX companies and 1244 corporate board members, this paper presents an industry-level analysis of board structures and member profiles, and assesses them in terms of the ASX (2014, 2003) principles and recommendations. The analysis reveals that the average board size was seven, non-executive director (NED) representation on boards was 70%, women held 14% of seats on corporate boards, 17% of NEDs were women and 2% of firms had chairperson/CEO duality positions. The Financial, Industrial and Energy sectors consisted of a majority of executive directors from business and the accounting field and NEDs from the engineering field with work experience of 20 to 30 years. A greater degree of diversity in the field of study and previous experience in the same and different sectors was found in relation to board members in the majority of industrial sectors. The analysis reveals that board characteristics such as board size, having a clear majority of NEDs on boards, decreasing trends in chairperson/CEO duality position, board member diversity in terms of qualifications and previous experience in the same and different sectors were largely consistent with the ASX principles and corporate governance practices.

Corporate Law & Governance Review

This paper investigates the changing duties and responsibilities of boards and directors of Australian public companies. The corporate governance environment in Australia is currently going through a period of significant transformation raising the question of whether in this fluid and shifting environment company and board performance can still be assessed largely on the basis of profit, share price and dividends generated over the short term. These almost certainly will continue for some time to be the key metrics of company and board performance and it is hard to see how it could be otherwise. Nevertheless, a growing chorus of influential stakeholders is calling for the introduction of a more balanced and comprehensive suite of performance indicators that better reflect the realities of corporate governance early in the Twenty-first Century. The paper examines how these stakeholders are reshaping corporate governance in Australia and also calling for a reconsideration of the way ...

Corporate Governance: An International Review, 2009

This study examines the determinants of forming a governance committee and whether such a committee constrains managerial opportunism. Research Findings/Insights: This study examines a sample of S&P 1,500 firms over the period of 1996 to 2002. It finds that firms with a larger, more independent, and more active board, higher agency costs (as indicated by lower managerial ownership and lower takeover vulnerability), and past occurrence of class-action lawsuits are more likely to voluntarily form a governance committee. This study also provides evidence that having a governance committee brings real consequences in that it constrains managerial opportunism by reducing aggressive financial reporting. Theoretical/Academic Implications: Consistent with substitution theory, this study documents that a firm is more likely to form a governance committee to compensate for its severe agency problems. It also demonstrates that delegating some corporate governance duties to a specific board committee could improve the effectiveness of board monitoring. Practitioner/Policy Implications: This study provides insights to regulators who are interested in regulating board structure. It suggests that whether a firm needs to form a governance committee is endogenously determined by the firm's characteristics when the firm has an independent board. In addition, this study documents that a voluntarily formed governance committee is able to mitigate agency costs in the form of constraining managerial accounting discretion.

2010

How is corporate governance measured? What is the relationship between corporate governance and performance? This paper sheds light on these questions while taking into account the endogeneity of the relationships among corporate governance, corporate performance, corporate capital structure, and corporate ownership structure. We make three additional contributions to the literature: First, we find that better governance as measured by the Gompers, Ishii, and Metrick [Gompers, P.A., Ishii, J.L., and Metrick, A., 2003, Corporate governance and equity prices, Quarterly Journal of Economics 118(1), 107-155.] and , What matters in corporate governance?, Working paper, Harvard Law School] indices, stock ownership of board members, and CEO-Chair separation is significantly positively correlated with better contemporaneous and subsequent operating performance. Second, contrary to claims in GIM and BCF, none of the governance measures are correlated with future stock market performance. In several instances inferences regarding the (stock market) performance and governance relationship do depend on whether or not one takes into account the endogenous nature of the relationship between governance and (stock market) performance. Third, given poor firm performance, the probability of disciplinary management turnover is positively correlated with stock ownership of board members, and board independence. However, better governed firms as measured by the GIM and BCF indices are less likely to experience disciplinary management turnover in spite of their poor performance.

International Journal of Organizational Analysis, 2017

The study examines the impact of corporate governance practices on the level of financial disclosures made by the Indian firms. This assumes importance in the context of the role of financial disclosures in addressing the agency problem. Financial disclosure score is computed by considering disclosures provided by the generally accepted accounting principles and is our dependent variable. Our independent variable - corporate governance score is an index comprising of external governance mechanisms. We empirically examine the impact of corporate governance practices on financial disclosure using multiple regression model for 200 large listed Indian firms. The study suggests that quality of governance practices significantly improves financial disclosure practices of the firm. Particularly, the composition of audit committee is effective in improving disclosures. The finding has implications for policy makers and practitioners. It will help investors, lenders and other stakeholders to assess firms’ financial disclosure quality. In addition, the findings, suggest the influence of governance practices on disclosure, might help in the formulation of appropriate policies about board structure and audit function. It is also a call to investors to emphasize on governance quality of the investing firms.The study builds a case for an urgent intervention for improvising the existing governance standards to improve the quality of financial disclosure in an emerging market context. Keywords: Corporate Governance, Financial Disclosure, Financial Reporting, Disclosure Index, Corporate Governance Index

Journal of Applied Accounting Research, 2018

Purpose The purpose of this paper is to investigate the effect of corporate board attributes, ownership structure and firm-level characteristics on both corporate mandatory and voluntary disclosure behaviour. Design/methodology/approach Multivariate regression techniques are used to estimate the effect of corporate board and ownership structures on mandatory and voluntary disclosures of a sample of Libyan listed and non-listed firms between 2006 and 2010. Findings First, the authors find that board size, board composition, the frequency of board meetings and the presence of an audit committee have an impact on the level of corporate disclosure. Second, results indicate that ownership structures have a non-linear effect on the level of corporate disclosure. Finally, the authors document that firm age, liquidity, listing status, industry type and auditor type are positively associated with the level of corporate disclosure. Research limitations/implications Future research could inves...

orporate Governance and Organizational Behavior Review, 2023

The aim of this research is to enhance existing literature pertaining to corporate disclosure through an investigation of financial risk information that has been reported in annual reports. The study also seeks to determine the extent of disclosure and how it has changed over time. Furthermore, it examines the effects of board busyness, size, independence, and meetings on financial risk disclosure. The content analysis method was used to evaluate the annual reports of 4 energy companies over a 13-year period, resulting in 52 firm-year observations. The study used secondary data sources and focused on companies that were listed between 2009 and 2021. The findings indicate that board size has a positive impact on financial risk disclosure, whereas board independence has a negative impact. However, no significant effects were found for board busyness and board meetings. These results were robust across various estimation techniques. However, the study is limited in that it only considered certain board characteristics, and future research should explore the effects of other board characteristics and incorporate additional committee characteristics.

If joint stock companies and agency problem are twins then board of directors will be their after-birth. As opine by Jesen and Meckling (1976) since the separation of ownership from management through joint stock companies, agency problem has never been eliminated. Various approaches such as laws, trustee, auditing, have been used to arrest the agency problem and protect the benefit of shareholders. But board of directors has emerged as an efficient approach to protect shareholders benefit. This paper has revealed the impact of board size, number of promoter directors and independency of the board on the total benefits a shareholder gets for investing. An unbalance panel data was collected from annual reports of 25 companies through purposive sampling for the accounting years 2009 to 2013.The Hussmann’s test was used to check the appropriate regression method to statistically test the impact of board structures on total shareholder’s return. It was found that, the average board size in companies was 12 members out of which half were independent, 3 are promoters/founders and remaining are other executives. Shareholders also get more than 90% of their returns from changes in share prices. The random effect regression method reports that, all the board variables have a positive relationship with shareholders return with the exception of board size but only board independence is significant @ 5%. Promoter directors have an inverse relationship with capital gain whiles board size and independent directors have positive correlation.

Universal Journal of Accounting and Finance, 2021

The objective of the present research is to examine the relationship between corporate governance and voluntary disclosure, and to determine how certain factors enhance governance practices and consequently increase voluntary disclosure. The study considers the content analysis of 22 Saudi listed companies from 2015 to 2019. A comprehensive index is developed, with a check-list covering 30 items to extract and measure corporate governance practices and levels of voluntary disclosure. The researchers use ordinary least squares (OLS) regression to examine whether corporate governance-specific mechanisms can explain any differences in voluntary disclosure levels among the listed companies. The results indicate a statistically significant relationship between the number of non-executive directors and board size and the level of voluntary disclosure. This study concluded that non-executive directors and board size are ranked the highest in terms of their positive effects on voluntary disclosure. The relationship between the independent directors and audit committees and voluntary disclosure is insignificant. The results suggest that the high number of non-executive directors and the increase in the number of directors on the boards lead to greater voluntary disclosure of information. This study helps regulators of corporate governance and company directors understand the factors affecting voluntary disclosure. Corporate governance regulators should require an increase in the minimum number of boards and non-executive directors for listed companies in order to gain the desired levels of voluntary disclosure and transparency. Saudi listed companies are advised to willingly increase their board members to the maximum number specified by regulation. This study has some limitations as participants represented a small sample; hence, the results cannot be generalised. Furthermore, the voluntary disclosure data were collected only from annual reports; sources such as websites, public announcements and press releases, were not taken into account, but would have provided many relevant details.

SSRN Electronic Journal, 2000

We provide arguments and present evidence that corporate governance structures are composed of interrelated mechanisms, which are in turn endogenous responses to the costs and benefits firms face when they choose those mechanisms. Examining board structures and the use of corporate charter provisions in a sample of more than 2,300 firms over a four-year period we find that firms cluster in their use of governance mechanisms. In particular, the set of charter provisions that firms use, as measured by the Gompers, Ishii, and Metrick (2003) G Index, is associated with board structure, with the laws of the state in which the firm is incorporated, and with firm and industry characteristics. We also find that some governance structures appear to serve as substitutes. Specifically, firms that have powerful boards (as measured by board independence) also have the greatest number of charter provisions, suggesting that the market for corporate control is less effective as a monitoring mechanism for these firms. In contrast, firms that have less powerful boards tend to have few charter provisions, suggesting that the market for corporate control plays a greater monitoring role at such firms. To address potential endogeneity issues, we employ three-stage least squares analysis to estimate these relationships within a system of equations. Our results from this analysis are consistent with the hypothesis that powerful boards serve as a substitute for the market for corporate control. Finally, our findings suggest that causality runs from the board to the choice of charter provisions, but not vice versa. , 2005, The determinants of corporate board size and composition: An empirical analysis, working paper.

Jurnal Muara Ilmu Ekonomi dan Bisnis, 2019

This study examines the impact of the independent board, independent audit committee and institutional ownership on voluntary disclosure (by placing company size as a moderating variable) in Indonesia banking companies. Data collected from the annual report of banking companies listed on the Indonesia Stock Exchange throughout the year of study. Hypotheses developed to be tested with a variance based approach and the results were interpreted. The result has shown that the increase of independent board members and independent audit committee members tend to decrease the level of voluntary disclosure (although the impact is not significant). Independent board and independent audit committee performed this to reduce cost due to a high disclosure and to avoid the threat of high competition in banking companies. The other result has shown that institutional investors are considered more professional and powerful in supervising management to disclose more information to the public. The final section of the study's findings indicated that firm size cannot be as a moderating variable on the impact of the independent board, independent audit committee and institutional ownership toward voluntary disclosure.

Journal of Banking & Finance, 2002

In this paper we examine whether regulation can be used to substitute for internal monitoring mechanisms (percentage of outside directors, officer and director common stock ownership, and CEO/Chair duality) to control for agency conflicts in a firm. We find that, in general, the percentage of outside directors is negatively related to insider stock ownership, but is not affected by CEO/Chair duality. CEO/Chair duality is, however, less likely when insider stock ownership increases. We find these internal monitoring mechanisms to be significantly less related with regulated firms (banks and utilities). We conclude that to the extent that regulations reduce the impact of managerial decisions on shareholder wealth, effective internal monitoring of managers becomes less important in controlling agency conflicts.