Internal control information disclosure and corporate governance: evidence from an emerging market

Abstract

Purpose The purpose of this study is to increase our understanding of the impact of corporate governance factors on the disclosure of internal control information by firms in Ghana. Design/methodology/approach A data set from 110 firms in Ghana for the year ending of 2013 was used. Each annual report was individually examined and coded to obtain the disclosure of internal control information index. Descriptive analysis was performed to provide the background statistics of the variables examined. This was followed by regression analysis, which forms the main data analysis method. Findings Results of the disclosure of internal control information mean of 35 per cent indicate that most of the sampled firms did not disclose sufficient internal control information in their annual reports. The low level of internal control information disclosure cannot be used by stakeholders to determine the level of corporate governance practices in the sampled companies. The results of the regression analysis indicate that board independence is a significant variable that explains the disclosure of internal control disclosure. This supports the generally held view that independent directors help to improve the quality of disclosure and increase the transparency of information. Originality/value This is the first study in Ghana that considered the impact of corporate governance factors on internal control information disclosures. This study contributes to the literature on the relationship between corporate governance and disclosure by showing that the disclosure of internal control information in Ghana is associated with the proportion of independent board members. This findings support Sarbanes–Oxley (SOX) 404 requirements, even though this is not compulsory for Ghanaian firms unlike their US counterparts. The findings of this study will help market regulators in Ghana and Sub-Saharan Africa, Security and Exchange Commission (SEC) and the Sub-Saharan African Exchanges in evaluating the adequacy of the current disclosure regulations in their countries. Understanding the board composition and their impact on voluntary disclosure provides evidence on the sufficiency of the board of directors’ guidelines in the corporate governance code in Sub-Saharan African countries.

Internal control quality, voluntary disclosure, and cost of equity capital: The case of an unregulated market

“…In this nonregulated internal control disclosure settings, several approaches have been used to proxy for ICQ, including (a) the construction of an internal control disclosure index (e.g., Agyei‐Mensah, ); (b) the survey of internal auditors (e.g., Mazza & Azzali, ); (c) the analysis of the external auditors' audit report; and (d) the survey of external auditors (e.g., Khlif & Samaha, ). Accordingly, to get information about ICQ we need to undertake a survey among either internal or external auditors.…”

The Effects of Board Compositions and Audit Committee Characteristics on Information Disclosure Practices: A Case of Singapore

“…Hence, non-executive directors are needed on the boards to monitor and control the actions of executive directors. Through this insight, it could be supported by multiple studies which argue that there is a significant connection between the proportion of non-executive directors and information disclosure practices (Apadore and Zainol, 2014;Agyei-Mensah, 2016;Al-Janadi et al, 2016;Mandzila and Zéghal, 2016; Ben-Amar and Zeghal). Hashima et al (2015);and Scholtz and Smit (2015) have provided more concrete evidences to enlarge an understanding on the topic.…”

The Effect of the Board of Directors and Audit Quality on Disclosure of Internal Control Practices: Evidence from European Companies

“…In this regard, several researchers state that the size of the board is a determinant of disclosure of internal control as companies with a large board are more involved in this practice (Michelon et al, 2009;Hunziker, 2013;Li, Zhang, & Wang, 2014). However, other researchers state that the size of the board affects disclosure negatively (Leng & Ding, 2011;Agyei-Mensah, 2016). As a result, the effect of this characteristic of the board is still controversial.…”