Corporate boards, audit committees and voluntary disclosure: evidence from Italian Listed Companies

Abstract

This paper investigates the interplay between governance and disclosure in an agency setting, featured by concentrated ownership and high insider shareholders representation in the board. In this context, agency conflicts happen between large controlling shareholders and minority outside investors, with risks of private benefits exploitation. We regressed a voluntary disclosure index on seven governance variables related either to the board structure and functioning. The empirical evidence is provided by the Italian stock market. Our results suggest the presence of a complementary relationship between governance and disclosure. Diligent monitoring activity is associated with greater transparency to the outside. The findings are consistent with the view that internal and external control tend to be present at the same time, since the presence of one of them reduces the incentive for the controlling shareholders to limit the other. The empirical evidence also show that larger boards are not detrimental to outside shareholders, with regard to voluntary disclosure. The study can contribute to the understanding of the relationship between governance and disclosure in a particular agency setting. They might be of interest to practitioners and regulators, insofar as they are consistent with calls for more disclosure requirements in this agency setting

The Relationship Between Board Characteristics and Environmental Disclosure: Evidence from Turkish Listed Companies

“…Furthermore, Elzahar and Hussainey (2012) stated that the increased board size may lead to an increase in the number of directors who have a financial or accounting background, which could have a positive influence on corporate environmental disclosure (Elzahar and Hussainey 2012). Consistent with these arguments, the results of the empirical studies such as Janggu et al (2014), Ntim et al (2013), Jizi et al (2014), Haji (2012), Akhtaruddin et al (2009), Buniamin et al (2011), Sun et al (2010, Cheng and Courtenay (2006), Liao et al (2014), Allegrini and Greco (2013), Samaha et al (2015), Lim et al (2007), Kathyayini et al (2012), Hidalgo et al (2011) documented a positive relationship between the board size and the level of disclosure.…”

“…In line with these theoretical arguments, the results of empirical studies usually indicate that the proportion of independent directors on the board has a positive impact on the volume of voluntary disclosure, including environmental disclosure (e.g., Ntim et al 2013;Gisbert and Navallas 2013;Rupley et al 2012;Arcay and Vazquez 2005;Sharif and Rashid 2014;Jizi et al 2014;Barros et al 2013;Khan et al 2013;Cheng and Courtenay 2006;Liao et al 2014;Allegrini and Greco 2013;Cai et al 2014).…”

“…On the other hand, it is possible to say that there has been relatively few attempts to investigate the relationship between corporate governance structure and environmental information disclosure, especially in the context of emerging economies (Michelon and Parbonetti 2012;Khan et al 2013). However, corporate governance mechanisms, in particular board structure, could be an important determinant of environmental disclosure, since firms' disclosure policies are basically determined by the board of directors (Ernstberger and Grüning 2013;Allegrini and Greco 2013;Cheng and Courtenay 2006;Gul and Leung 2004;Cormier et al 2015;Iatridis 2013;Arcay and Vazquez 2005;Michelon and Parbonetti 2012).…”

“…Agency theory provides a framework to link corporate governance to environmental disclosure, as corporate governance mechanisms intend to control the agency problem and align the interests of management and stakeholders by reducing information asymmetry (Allegrini and Greco 2013;Ho and Wong 2001). In this framework, it is suggested that the board of directors is the ultimate internal control mechanism for overseeing managers (agents) on behalf of shareholders and other stakeholders (Rupley at al.…”

“…As an important determinant of board effectiveness (Allegrini and Greco 2013;Amran et al 2014), board size can be seen as a crucial corporate governance mechanism that may influence the level of corporate voluntary disclosure, including environmental disclosure (Ntim et al 2013). On the other hand, both the theoretical and empirical literature provide contradictory explanations regarding the relationship between board size and environmental disclosure.…”