The association between disclosure of forward‐looking information and corporate governance mechanisms Evidence from the UK before the financial crisis period

The association between disclosure of forward‐looking information and corporate governance... Purpose – This paper aims to witness the importance of corporate governance mechanisms and investigates the relationship between the quality of disclosure of forward‐looking information in the narrative sections of annual reports and the governance mechanisms for non‐financial UK companies. Design/methodology/approach – Computerized content analysis using QSR NVivo 8 is used to measure the extent of forward‐looking information in the narratives of the annual reports for 238 companies listed in the London Stock Exchange. Cross‐sectional regression analysis is used to examine the impact of the corporate governance mechanisms on forward‐looking information. Findings – The results show that board size and the independence of the audit committee are associated with the level of voluntary disclosure of forward‐looking information. Research limitations/implication – One limitation of this study is that in controls for the effect of the financial crisis period, by selecting a representative year for a five‐year period, 2006. The authors argument in using this year is based on the fact that the main variables of interest do not vary significantly with time, the cross‐sectional analysis of the selected period will provide a fair view of the last five year‐period. Practical implications – The authors report the importance of some governance practices in the UK, such as the role of the board members as well as the importance of audit committee independence. Originality/value – This paper contributes to the literature by using computerized content analysis to examine the relation between corporate governance mechanism and disclosure quality of forward‐looking information using sample of companies before financial crisis period. The authors also examine governance mechanisms that are under‐researched in the field of forward‐looking disclosure. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Managerial Auditing Journal Emerald Publishing

The association between disclosure of forward‐looking information and corporate governance mechanisms Evidence from the UK before the financial crisis period

Managerial Auditing Journal, Volume 29 (7): 18 – Jul 1, 2014

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Publisher
Emerald Publishing
Copyright
Copyright © 2014 Emerald Group Publishing Limited. All rights reserved.
ISSN
0268-6902
DOI
10.1108/MAJ-01-2014-0986
Publisher site
See Article on Publisher Site

Abstract

Purpose – This paper aims to witness the importance of corporate governance mechanisms and investigates the relationship between the quality of disclosure of forward‐looking information in the narrative sections of annual reports and the governance mechanisms for non‐financial UK companies. Design/methodology/approach – Computerized content analysis using QSR NVivo 8 is used to measure the extent of forward‐looking information in the narratives of the annual reports for 238 companies listed in the London Stock Exchange. Cross‐sectional regression analysis is used to examine the impact of the corporate governance mechanisms on forward‐looking information. Findings – The results show that board size and the independence of the audit committee are associated with the level of voluntary disclosure of forward‐looking information. Research limitations/implication – One limitation of this study is that in controls for the effect of the financial crisis period, by selecting a representative year for a five‐year period, 2006. The authors argument in using this year is based on the fact that the main variables of interest do not vary significantly with time, the cross‐sectional analysis of the selected period will provide a fair view of the last five year‐period. Practical implications – The authors report the importance of some governance practices in the UK, such as the role of the board members as well as the importance of audit committee independence. Originality/value – This paper contributes to the literature by using computerized content analysis to examine the relation between corporate governance mechanism and disclosure quality of forward‐looking information using sample of companies before financial crisis period. The authors also examine governance mechanisms that are under‐researched in the field of forward‐looking disclosure.

Journal

Managerial Auditing JournalEmerald Publishing

Published: Jul 1, 2014

Keywords: Corporate governance; Board independence; Audit committee; Disclosure quality; Forward‐looking information; Governance mechanism; M4

References

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