Disclosure Quality and Corporate Governance: Evidence from Iran

Periodica Polytechnica Social and Management Sciences, 2016

The current study examines the effect of audit quality and internal and external corporate governance on the quality of disclosure of financial statements. In order to achieving the objectives of the study 7 hypotheses about audit quality and 7 hypotheses about internal and external corporate governance are postulated in the current study during 2009-2014 in Iran. Data analyzed in two regression models via the R software. The results indicate that there is no significant positive relationship between independent audit quality and the quality of disclosure of financial statements information, but there is a significant relationship between corporate governance and the quality of disclosure of financial statements information. So far, the current study is the first paper on the subject which conducted in the developing country such like Iran, the results of the study may give the strength to the auditing literature.

International Journal of Managerial Studies and Research

This study intends to investigate the relationship between corporate governance and disclosure quality. The study uses disclosure index to find out the firm's disclosure quality. For this purpose a sample of eighty firms listed on Karachi Stock Exchange (KSE) for the period of ten years i.e. 2005 to 2014 has been considered. Corporate governance variables tested for this study are the audit committee independence, board size, board independence, CEO duality, family ownership, institutional ownership. To measure the disclosure quality of the individual firms, the study has used the index score and it is checked against the information disclosed in the annual reports. Panel data estimation models have been employed for the purpose of analysis. The results reveal that better disclosure quality of the annual reports in non-financial sector can be achieved by having higher proportion of independent non-executive directors, separate board leadership structure, larger board size, higher the institutional ownership and lower ownership by family members in case of Pakistan.

2012

The aim of this study is to investigate the effect of corporate governance attributes on financial reporting quality in firms listed in Tehran Stock Exchange (TSE) during the period of 2003 to 2011. In this study McNichols (2002) and Collins and Kothari (1989) are used for financial reporting quality measurement purpose, and institutional ownership, ownership concentration, board independence and board size is considered as corporate governance attributes. The results of the study show that there is no relationship between corporate governance attributes including board size, board independence, ownership concentration, institutional ownership and financial reporting quality. In addition, no evidence is found to support significant relationship between control variables (audit size, firm size and firm age) and financial reporting quality.

Disclosure plays an important role in corporate governance. It permits the investors and shareholders to make better decisions. Corporate governance has not been the focus of previous studies on disclosure. This study examines the effects of smaller and larger board size, executive and non-executive board members and CEO duality on the extent of disclosure practices in Pakistan. The checklist containing 29 items adopted from previous researches in the same field is used to measure the level of disclosure. The items in the checklist are mainly divided into four categories of financial transparency, ownership structure, management structure and CSR. This checklist was then applied to 53 listed companies of different sectors in Karachi Stock exchange by the manual review of the annual reports of 5 years from 2007 to 2011 downloaded from each company’s website. The results of the study highlighted that the level of corporate governance disclosure is good in Pakistan. The findings showed that larger board size positively affects the level of corporate governance disclosure whereas CEO duality and board composition doesn't have significant impact on level of disclosure.

The purpose of this study is to examine the relationships between governance characteristics and disclosure quality in an emerging economy like Pakistan. Based on review of literature, it is proposed that CEO duality is negatively related to disclosure quality, while ownership concentration and audit quality are the factors that positively influence disclosure quality. This article explains the result that ownership concentration becomes a negative influence on disclosure quality when firms involved in CEO duality. The policymakers understand that how firm disclosure is affected by corporate governance with the help of this case. The results of this study could be applied by the policymakers to promote good governance in Pakistan further.

Davani (2005) reported that one of the biggest problems facing the Iranian investors is the poor quality of annual reports which preclude comprehensive and effective analyses. Makhija and Patton (2004) also found that institutional block holders lower the extent of voluntary disclosure in the firms' annual reports when they enjoy direct benefits of being in control (DBC), therefore, the minority group is being expropriated. Since the Iranian Commerce Code's requirement on information disclosure for public firms is limited to releasing only fundamental financial statements, the amount of disclosure in the Iranian firms' annual reports are largely voluntary in nature. It is reported that the extent of information disclosure is driven by the private motivation rather than satisfying the mandated disclosure requirements. Therefore, this study intends to determine the characteristics of corporate governance that influence the voluntary disclosures in Iran in terms of their usefulness and effects on the share prices as Price Informative Disclosures (PID) and their non-usefulness as Non-Price Informative Disclosures (Non-PID). These characteristics may help investors by presenting underlying economic substance of public firms listed on the Tehran Stock Exchange as their true financial picture may be unattainable. This study aims at depicting the Iranian stock market in which low transparency comes with low level of public confidence that results in the reluctant behaviour of investors from the private sector to buy shares. The findings, in general, suggest that the listed firms provide the market with a moderate amount of information which consists mainly of Non-PID matters. The lack of confidence among investors from the private sector is due to low level of transparency and failure to present true financial positions.

Journal of Public Administration and Governance, 2013

This study provides a critical review of different techniques used in recent accounting literature to investigate the association between corporate governance and corporate disclosure. Therefore, the main purpose of this study is to help future researchers to identify examples and to select suitable practices or to develop their own ones. It also provides contest of current issues related to the relationship between corporate disclosure and corporate governance and identifies gaps in the current literature that future research may aim to cover. The study examines 34 articles published during the 2007-2013 period. The review of these articles concludes that most of these published studies examined the association between corporate disclosure and one or more of board of directors, ownership construction and audit firm. The current study suggests that researchers can also examine the association between internal audit quality as an internal governance and corporate disclosure. The study reveals that researchers used a disclosure index and content analysis to measure corporate disclosure. However, other techniques can be applied as management earning forecast and the number of analysts.

Journal of Applied Business Research (JABR)

This paper studies the relationship between the disclosure level and firm-specific characteristics of firms listed on the Tehran Stock Exchange (TSE). Our study contributes to the firm financial disclosure literature by documenting the empirical evidence on the relationship between CEO tenure and firm disclosure. We use firms’ disclosure scores released by the Iranian Securities and Exchange Organization (SEO) that measure the disclosure level of listed companies. The research data consists of 2,719 firm-year observations from 404 Iranian listed firms on the TSE for 2003-2014. Using regression analyses, we find that longer CEO tenure improves the level of disclosure. Also, we document that firm profitability, liquidity, and asset-in-place have a positive effect on the disclosure level. Moreover, we report that leverage, age, and market share have an inverse effect on the disclosure level.

Academy of Accounting and Financial Studies Journal, 2021

This main objective of this study is to examine the impact of a number of variables on the extent of corporate governance disclosure in a firm's annual report. The study analyzes the impact of different variables, including Size of audited company, the existence of audit committee, size of board of directors, number of non-executive members in the board of directors, separated between chairman of board of director and CEO, complexity of firm's operations, size of company, debt ratio, profitability, ownership concentration and the institutional shareholders) on this level of Disclosure of corporate governance. A disclosure index consisting of thirty-seven items of information covering corporate governance was applied to the annual reports of a sample of 64 companies listed on the Amman Stock Exchange for the year 2010. The index is divided into two types of information: compulsory and voluntary. Regression analysis is used to examine the relationship between the extent of disclosure and the explanatory variables. The results of the study revealed that the disclosure level of compulsory items was high and there was no significant variations in the disclosure level between companies. On the other hand, the results indicated that the disclosure level of voluntary items was low and there was a significant variation between companies. The results of multiple regression analysis revealed that there is a positive and significant relationship between the level of corporate governance disclosure and the existence of audit committee, and the separated between the positions of chairman of board of director and CEO. Also, the study found a negative and significant relationship between the level of corporate governance disclosure and the number of non-executive directors in the board of directors. Finally, the study recommended the conduct of future research that may cover other aspects of the topic and incorporate new variables not covered by the current study.

Asian Journal of Finance & Accounting, 2012

Our paper aims to examine the relationship disclosure quality and Firm characteristics for a sample of 80 firms listed in the Iran financial market during 2006-2009. We use a linear regression analysis to examine the association between the disclosure quality and firm's characteristics measured by variables such as Current ratio, Acid ratio, Firm Size and P/B ratio.The results of study show that the disclosure quality is having positive and significant relation with Current Acid and P/B ratios. Also, we find that there is a significant and negative association between disclosure quality and Firm Size.