Antecedents of voluntary corporate governance disclosure: a post-2007/08 financial crisis evidence from the influential UK Combined Code

Abstract

This study investigates the level of compliance with, and disclosure of, good corporate governance (CG) practices among UK publicly listed firms, and consequently ascertains whether board characteristics and ownership structure variables can explain observable differences in the extent of voluntary CG compliance and disclosure practices. Design/Methodology/Approach: The study uses one of the largest datasets to-date on compliance and disclosure of CG practices from 2008 to 2013 containing 120 CG provisions drawn from the 2010 UK Combined Code relating to 100 UK listed firms to conduct multiple regression analyses of the determinants of voluntary CG disclosures. A number of additional estimations, including two stage least squares, fixed-effects and lagged structures, are conducted in order to test the robustness of the findings. Findings: The results suggest that there is a substantial variation in the levels of compliance with, and disclosure of, good CG practices among the sampled UK firms. We also find that firms with larger board size, more independent outside directors and greater director diversity tend to disclose more CG information voluntarily, whereas the level of voluntary CG compliance and disclosure is insignificantly related to the existence of a separate CG committee and institutional ownership. Additionally, the results indicate that block ownership and managerial ownership impact negatively on voluntary CG compliance and disclosure practices. The findings are fairly robust across a number of econometric models that sufficiently address various endogeneity problems and alternative CG indices. Overall, the findings are generally consistent with the predictions of neo-institutional theory. Originality/Value: This paper extends, as well as contributes to the extant CG literature by offering new evidence on compliance with, and disclosure of, good CG recommendations contained in the 2010 UK Combined Code following the 2007/08 global financial crisis. This paper also advances the existing literature by offering new insights from a neo-institutional theoretical perspective of the impact of board and ownership mechanisms on voluntary CG compliance and disclosure practices.

Trustee board diversity, governance mechanisms, capital structure and performance in UK charities

“…Empirically, the negative link between TGD and CS is empirically supportive of the results of previous studies (e.g., Adams & Ferreira, 2009;Elmagrhi et al, 2016;Gyapong et al, 2016;Ntim, 2015;Terjesen et al, 2015), which suggest that gender-diverse boards are associated with better monitoring over management, and thereby reducing agency problems that are often associated with managers having access to large free cash flows.…”

“…Additionally, stakeholder theory presents a charity as consisting of a nexus of explicit and implicit contracts among stakeholders, with each group providing the charity with the critical resources required, and in exchange, expect their interests to be satisfied (Freeman & Reed, 1983;Elmagrhi et al, 2016Elmagrhi et al, , 2017. For example, donors provide charities with finance and they require their funds to be used only for the purposes for which they have been given.…”

“…However, prior studies suggest that TBD (gender and ethnic diversity) impacts positively on FP (e.g., Borghesi et al, 2016;Carter et al, 2003;Delis et al, 2016;Estelyi & Nisar, 2016;Gyapong et al, 2016;Ntim, 2015;Terjesen et al, 2015), voluntary CG disclosure (AlBassam et al, 2016;Elmagrhi et al, 2016;Abdulrahman et al, 2017;Elamer et al, 2017), audit quality (Gul et al, 2008), board monitoring (Triana et al, 2013), board meetings (Adams & Ferreira, 2009), dividend payout (Byoun et al, 2013), risk disclosure and social responsibility (Barako & Brown, 2008;Brammer et al, 2007;Ntim & Soobaroyen, 2013;Haque & Ntim, 2017), but negatively on executive pay (Gregory-Smith et al 2014;Newton, 2015;Ntim et al, 2015Perryman et al, 2016) and earnings management (Elghuweel et al, 2017). Observably, none of these studies relate to the charity sector and therefore, highlighting the lack of evidence.…”

Corporate boards, ownership structures and corporate disclosures

“…Prior studies (Alhazaimeh et al, 2014, Barako et al, 2006, Elzahar and Hussainey, 2012, Laksmana, 2008, Ntim and Soobaroyen, 2013a, b, Ntim et al, 2012a, Samaha et al, 2012, Wang and Hussainey, 2013Elmagrhi et al, 2016Elmagrhi et al, , 2017 have relied on a number of theories, such as agency, legitimacy, resource dependence and stakeholder theories to inform and interpret the motivations of managers to engaging in mandatorily and voluntarily disclosures. These theories may inform and interpret the motivations differently.…”

“…The following rules are used to build a comprehensive index: the items required by statutory regulations (for example ITL, LCL and BL); a review of relevant disclosure literature to identify items specific to this study; and items included in the annual reports published by Libyan companies (e.g., Elmagrhi et al, 2016, Laksmana, 2008, Ntim and Soobaroyen, 2013a, b, Ntim et al, 2012a, Samaha et al, 2012, Wang and Hussainey, 2013 items that are expected to be disclosed in annual reports of Libyan firms. A binary coding scheme is used in which the presence of an item is scored 1, otherwise 0 and thus, with this unweighted scoring, the higher a firm's score, the better its disclosure will seem to be and vice-versa.…”