Corporate Governance and Voluntary Disclosure: A Synthesis of Empirical Studies

Abstract

Voluntary disclosure (VD) is considered potentially important for efficient functioning of the capital market as it communicates firms’ performance and governance to shareholders and potential investors, which boost their confidence. This article attempts to provide a brief conceptual framework of VD and corporate governance (CG), and also reviews the empirical literature dealing with relationship between them. To this end, the article uses systematic electronic literature search method, which takes into account 65 empirical studies published over the period 1998–2018. An investigation of empirical findings points to some factors that may have contributed toward the apparent inconsistent findings observed to date. In particular, the article focuses on two intervening factors for variation of results—such as CG system and measurement of explanatory variables. The findings suggest that studies mostly from Anglo-Saxon system (ASS) show complementary relationship between different attributes of CG with VD, whereas in case of communitarian system, studies mostly depict an insignificant impact of CG attributes on VD except for few studies showing their positive/negative impact on VD. However, in case of emerging market system (EMS), some studies show substitutive relationship between board independence (BI) and VD while other CG attributes such as board size (BS), (GD), and audit committee independence (ACI) in most of the studies complement VD supporting the resource-based perspective. Furthermore, the association of ownership structure (OS) and role duality (RD) with VD is mixed. Another factor, which is considered to be added to variation of results, is measurement of explanatory variables whereby albeit studies employed same concepts, operational definition of variables intervenes into the relationship between CG and VD. The findings of this article provide some deeper insights about the complementary and substitutive relationships between CG and VD by integrating diverse empirical findings under different research contexts. Future research can extend to analyze some other institutional factors like investors’ protection rights and legal enforcement, which might also have played some role in influencing the relationship between CG and VD. Furthermore, it is also evident from the review that BS and BI are the most commonly studied CG attributes in relation to VD, whereas attributes like GD and ACI, despite their theoretical relevance and practical importance are least studied in relation to VD, thus signaling the need to focus on these attributes in future studies.

Factors affecting corporate environmental disclosure in emerging markets: The role of corporate governance structures

“…Although some researchers have recently sought to examine the impact of CG on CED, mainly in the context of developed countries (e.g., Giannarakis et al, 2019; Khaireddine, Salhi, Aljabr, & Jarboui, 2020; Saha & Kabra, 2020), the power of different structures of CG on CED has not been extensively examined, specifically in the developing settings (Fernandes, Bornia, & Nakamura, 2019). For example, Giannarakis et al (2019) indicate that the association between CG and CED is a context specific, primarily linked to the regulatory environment.…”

The Relationship between Corporate Governance and Voluntary Disclosure: The Role of Boards of Directors and Audit Committees

“…It is important to note that because the disclosure here is voluntary, companies may disclose information in different ways and through different channels, including annual reports, interim reports, analyst presentations, investor relations, press releases, conferences and websites. It is also noteworthy that structured annual reports remain the primary source for independently verifying comprehensive information about managers' performance at regular intervals (Saha & Kabra, 2020).…”

“…The quality of voluntary disclosure (VD) included in companies' annual reports is at the heart of modern financial reporting. Corporate VD is often a major source of information for capital markets (Frenkel et al, 2020), and it is important for their effective functioning because it increases potential shareholder and investor confidence by clearly communicating corporate governance and performance (Saha & Kabra, 2020). Thus, more disclosure transparency increases stakeholder's awareness and confidence (Matoussi & Chakroun, 2008).…”

Exploring the Hotspots and Frontiers of Voluntary Disclosure Studies around the World Using Bibliometric Analysis

“…To date, the three most recent studies that review prior literature specifically on the various types of voluntary disclosure are Samaha et al (2015), Zaini et al (2018) and Saha and Kabra (2020). Samaha et al (2015) conducted meta-analysis on a sample of 64 empirical studies on voluntary disclosure published between 1997 to 2013 to assess the impact of board and audit committee characteristics on voluntary disclosure, given that they are the key determinants of corporate reporting policy.…”

“…Acknowledging that there is lack of comprehensive literature survey about the relationship between corporate governance and voluntary disclosure in annual reports, that encompasses "different regulatory regimes over varying times with different corporate governance attributes", Saha and Kabra (2020) embarked on a systematic literature review of empirical research globally to synthesize and identify intervening factors that could explain the conflicting results in prior studies. Reviewing empirical studies published between 1998 to 2018, their study seeks to answer two research questions, namely (1) does the relationship between corporate governance and voluntary disclosure vary under different corporate governance systems and (2) does the difference in measurement of variables influence their relationship?…”