Peer-Reviewed Journal Details
Mandatory Fields
Donnelly, R,Mulcahy, M;
2008
August
Corporate Governance-An International Review
Board Structure, Ownership, and Voluntary Disclosure in Ireland
Validated
()
Optional Fields
Board Composition Outside Directors Institutional Shareholders MANAGEMENT EARNINGS FORECASTS CORPORATE GOVERNANCE CEO DUALITY INSTITUTIONAL INVESTORS EMPIRICAL-ANALYSIS DIRECTORS ASSOCIATION PERFORMANCE MECHANISMS SEPARATION
16
416
429
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.
DOI 10.1111/j.1467-8683.2008.00692.x
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