Board Structure, Ownership, and Voluntary Disclosure in Ireland

Abstract

Manuscript Type: EmpiricalResearch Question/Issue: This is a cross-sectional study of the relation between corporate governance and voluntary disclosure in Ireland. Research Findings/Results: We report clear evidence that voluntary disclosure increases with the number of nonexecutive directors on the board. Firms that have a nonexecutive chairman make greater voluntary disclosures than other firms. This finding is not robust to the inclusion of other explanatory variables. We find no evidence that ownership structure is related to voluntary disclosure. Theoretical Implications: The results regarding nonexecutive directors are interpreted as independent boards facilitating a reduction in information asymmetry between owners and managers. While this supports the predictions of agency theory, the absence of evidence that ownership structure influences voluntary disclosure does not. It is posited that sociological and organizational factors (e.g., informal networking) that pervade the Irish market mitigate against our disclosure measure capturing all aspects of voluntary disclosure. Furthermore, indirect evidence is provided that there are other costs and benefits to disclosure that vary across firms and may outweigh agency costs in many situations. We conclude that while agency theory has some explanatory power for voluntary disclosure, it cannot explain all the cross-sectional differences in voluntary disclosure by Irish public limited companies. Practical Implications: The results support the attention paid by regulators to the proportion of nonexecutive directors on the board. However, the costs and benefits to disclosure vary across firms. Regardless of agency considerations and regulatory guidelines, firms will ultimately formulate their disclosure policy with reference to overall marginal costs and marginal benefits.

Corporate Governance and Corporate Social Responsibility Disclosure: Evidence from the US Banking Sector

“…Our findings are in line with previous research into the relationship between board size and voluntary disclosure (e.g. Lim et al, 2007;Donnelly and Mulcahy, 2008). The results indicate that, possibly because banks are complex organisations, having a larger number of directors share the work has a positive impact on the firm's attitude towards its stakeholders.…”

“…This is in line with previous research into independent directors' attitude towards CSR activities (Johnson and Greening 1999;Ibrahim et al, 2003) and independent directors' influence on transparency and voluntary disclosure (Cheng and Courtenay, 2006;Patelli and Prencipe, 2007;Donnelly and Mulcahy, 2008;Li et al, 2008;Chau and Gray, 2010). These findings indicate that independent directors promote both shareholders' and other stakeholders' interests with regard to CSR disclosure.…”

“…Moreover, prior studies indicate that boards of directors with a high proportion of independent directors tend to facilitate a comparatively high degree of transparency and voluntary disclosure (Cheng and Courtenay, 2006;Patelli and Prencipe, 2007;Donnelly and Mulcahy, 2008;Li et al, 2008;Chau and Gray 2010). This suggests that independent directors are likely to support the disclosure of CSR activities to reduce information asymmetry between insiders and outsiders.…”

“…Empirical research suggests that boards of directors' attention to monitoring is negatively affected by CEO duality (Tuggle, Sirmon, Reutzel, and Bierman, 2010), as is the level of voluntary disclosure (Donnelly and Mulcahy, 2008;Chau and Gray, 2010).…”

The Determinants of Corporate Social Responsibility Disclosure: The Case of Malaysian Government-Linked Companies in Malaysia

“…Literature regarding the relationship between board independence and CSR disclosure are found to have a mixed result. Eng and Mak (2003) and Esa and Mohd Ghazali (2012) found a negative relationship between board independence and CSR disclosure whereas Donnelly and Mulcany (2008) found a negative relationship. Said et al (2009) …”