The influence of institutional contexts on the relationship between voluntary carbon disclosure and carbon emission performance

This article examines the relationship between the level of voluntary carbon disclosure (VCD) and carbon emission performance and how the institutional context influences this relationship. Using a sample of Global 500 firms participating in the Carbon Disclosure Project (CDP) over the period 2008–2015, the evidence shows a negative relationship between voluntary carbon disclosure and carbon emission performance, which is consistent with the legitimacy theory that VCD may be undertaken for the purposes of legitimation. However, stringent carbon institutions appear to restrict legitimation attempts and help better reflect underlying performance.     

The effect of globalization and legal environment on voluntary disclosure

We examine how interactions with foreign capital, product, and labor markets affect the disclosure practices of non-U.S. multinational firms. Drawing on literature related to multinationals, country-level legal institutions, and accounting disclosures, we expect that the relation between globalization and voluntary disclosure will be conditioned by the legal environment in a firm's home country. Specifically, while firms from countries with a strong legal environment (e.g., common-law countries) already face pressure for good disclosure, globalization can increase the benefits associated with good disclosure to firms from weak legal environments (e.g., civil-law countries). We use a self-constructed voluntary disclosure index and hand-collected disclosure and foreign activity data for 643 non-U.S. firms from 30 countries for 2003. We find a significant interaction between globalization and the legal environment. This indicates that for the same level of globalization, there is more voluntary disclosure for firms based in weak legal environments. Our results suggest that globalization is an important variable that has been overlooked in much of the previous cross-country research.     

Signaling strategies in annual reports: Evidence from the disclosure of performance indicators

In voluntary annual report communication, empirical results of signaling theory are contrasting, mainly owing to problems in disclosure measurements. We focus on a specific piece of incremental information and study the signaling strategies in annual reports by analyzing the disclosure of performance indicators that provide incremental information. In this paper, we scrutinize the business review of a sample of 120 listed Italian companies for fiscal year 2010. After controlling for size, risk, and industry, our analysis confirms that the number of indicators published is positively related to firm profitability. Our results help clarify the signaling strategies in annual report communication. Operatively, our evidence can help regulators and standard setters to better discipline the communication of relevant and private information in annual reports, particularly performance indicators.     

The changing trends of corporate social and environmental disclosure within the Australian gambling industry

This study examines how the corporate social and environmental disclosure (CSD) practices of a sample of gambling companies operating within Australia appears to change around the time of three specific interrelated Australian government initiatives; the Productivity Commission, 1999, Australia's Gambling Industries, Report No. 10, the subsequent establishment of the Ministerial Council on Gambling and the MCG‐initiated National Framework on Problem Gambling. Drawing upon three complementary theories, namely legitimacy, stakeholder and institutional theory, our analysis of the extent and type of CSD in the annual reports of gambling companies over a 15 year period suggests that CSD is a response to social pressures created around the time of these initiatives.     

Voluntary disclosure of reasons for auditor changes and the capital market reaction to information disclosure

This study examines the association between firm attributes and management’s voluntary disclosure of the reason(s) for auditor changes and evaluates the capital market reaction to information disclosure of the auditor change events accompanied by preexisting red flag and non-red flag issues. We find that managers are more likely to disclose the reason(s) for auditor changes when those changes occurred because of benign business reasons or if the reasons do not indicate the presence of any underlying operating or financial reporting problem. On the other hand, managers are less likely to disclose the reason(s) for auditor changes when those changes are preceded by red-flag situations. Furthermore, auditor changes accompanied by preexisting red-flag situations are viewed negatively by the capital market, implying that the full disclosure of reasons for auditor changes is informative to investors. This observation is supported further by our market-based analyses, which consistently show that auditor changes accompanied by prevailing red flag issues are valued incrementally in the market above and beyond the reportable events (under FRR No. 31) and auditor-initiated changes. The study contributes to the recent policy debate related to mandating the disclosure of the reason(s) for auditor switches. Specifically, the results support the recent debates that the current voluntary disclosure regime results in selective disclosure practices that are likely to contribute to the general lack of transparency with respect to auditor changes.     

Determinants and consequences of voluntary disclosure in an emerging market: Evidence from China

In this paper we examine empirically the determinants of voluntary disclosure in the annual reports of Chinese listed firms that issue both domestic and foreign shares and determine if the cost of debt capital is related to the extent of voluntary disclosure. We find the level of voluntary disclosure is positively related to the proportion of state ownership, foreign ownership, firm performance measured by return on equity, and reputation of the engaged auditor. There is no evidence, however, that companies benefit from extensive voluntary disclosure by having a lower cost of debt capital.     

The disclosure of corporate social responsibility reports and sales performance in China

Based on legitimacy and stakeholder theory, we investigate whether there is an association between the disclosure of corporate social responsibility reports and a firm's sales performance in China. The empirical results reveal that the return on sales and sales growth are positively associated with the level of corporate social responsibility reporting in China. This positive association is strengthened when firms have concentrated customers. Firms use corporate social responsibility reports to improve sales performance and attract customers, who are one of their major stakeholders, and retain their legitimacy.     

The use of the Internet for corporate reporting in the Mercosur (Southern common market): The Argentina case

This study examines disclosure practices on the websites of companies listed on the Buenos Aires Stock Exchange. We perform content analysis to provide evidence on Internet reporting practices by 84 publicly traded firms. We also identify the characteristics of firms that communicate financial and non-financial information on the Internet. We find that companies in the financial and insurance, services and mining industries disclose more financial and non-financial information on their websites than companies in other industries. The average concentration of ownership is 68%, with 27% of the companies being controlled by foreign groups. Those companies with higher concentration disclose more financial and non financial information than companies with less concentration. Companies in the financial and insurance and service industries, utilize their websites for commercial purposes to facilitate access to customers to their accounts and also to sell services. This e-commerce usage of websites is less developed in other industries. About 71% of companies in the financial and insurance industry are included in the Merval25 index and are audited by Big 4. These companies are both larger in size and less profitable than companies in other industries. We find that profitability and leverage do not have significant effect on corporate Internet reporting practices and that growth has negative effect on corporate Internet reporting practices. We also find that companies in the mining sector provide significantly more disclosure about social responsibility indicating a desire to improve the public image of harming the environment. The results documented, herein, extend the literature on voluntary disclosure of financial and non-financial information using the Internet in emerging markets.     

The association between voluntary disclosure and corporate governance in the presence of severe agency conflicts

Agency conflicts between different types of investors are particularly severe in the presence of high family and block-holder ownership. By focusing on a setting characterised by high ownership concentration, we study the role of independent directors in promoting transparency through increased disclosure. In our tests, we use a sample of Spanish firms and, consistent with prior work, show that the presence of these directors is strongly associated with increased voluntary disclosure. Additionally, we find that when an executive director takes on Chair responsibilities the level of voluntary information is reduced, creating potential conflicts with the role of independent directors. Our results suggest that a strong legal framework holds firm-level clashes of interest in check. We conclude that this regulatory environment can create sufficient incentives to bring together the interests of minority and majority shareholders and guarantee an efficient monitoring role of independent directors. However, results suggest that other mechanisms should be reinforced in order to improve the role of governance control on agency relationships, particularly in the case of the concentration of Chair and executive responsibilities.     

The effect of recognition vs. disclosure on investor valuation: The case of pension accounting

Whether or not the format of financial reporting influences user assessment of the reported information is an important issue to the Securities and Exchange Commission (SEC), the Financial Accounting Standards Board (FASB), and managers. Do investors, in determining security prices, differentiate between information recognized in the balance sheet and that disclosed in the footnotes? The findings indicate that investors appear to consider pension information disclosed in the footnotes as value-relevant, given that an accrued (prepaid) pension liability (asset) is also recognized in the balance sheet. Second, investors attach equal importance to both sorts of pension information.     

The politics of transnational accountability policies and the (re)construction of corruption: The case of Tunisia,Transparency International and the World Bank

This study explores the intersection between accountability policies and anti-corruption measures. Transnational actors define acceptable governance and implement accountability policies on the assumption that corruption is a problem endemic to developing countries. Such accountability policies influence and help constitute transnational geographic and social spaces. However, the impacts of such assumptions and the resultant policies on developing countries and their citizens have not been widely investigated. This study uses a critical discourse analysis of the case of Tunisia before and after its 2011 revolution, to explore the politics and vested interests specific to anti-corruption policies promoted by transnational actors. The study’s contribution is twofold: Firstly, we identify the highly fungible character of the emanant cycles of Western-driven corruption discourses, and indicate their consequences in Tunisia. Secondly, we propose a future research agenda towards non-exploitative anti-corruption and accountability policies.     

The extent of corporate governance disclosure and its determinants in a developing market: The case of Egypt

This paper assesses the extent of corporate governance voluntary disclosure and the impact of a comprehensive set of corporate governance (CG) attributes (board composition, board size, CEO duality, director ownership, blockholder ownership and the existence of audit committee) on the extent of corporate governance voluntary disclosure in Egypt. The measurement of disclosure is based on published data created from a checklist developed by the United Nations, which was gathered from a manual review of financial statements and websites of a sample of Egyptian companies listed on Egyptian Stock Exchange (EGX). Although the levels of CG disclosure are found to be minimal, disclosure is high for items that are mandatory under the Egyptian Accounting Standards (EASs). The failure of companies to disclose such information clearly shows some ineffectiveness and inadequacy in the regulatory framework in Egypt. Moreover, the phenomenon of non-compliance may also be attributed to socio-economic factors in Egypt. Therefore, it is expected that Egyptian firms will take a long time to appraise the payback of increased CG disclosure. The findings indicate that that—ceteris paribus—the extent of CG disclosure is (1) lower for companies with duality in position and higher ownership concentration as measured by blockholder ownership; and (2) increases with the proportion of independent directors on the board and firm size. The results of the study support theoretical arguments that companies disclose corporate governance information in order to reduce information asymmetry and agency costs and to improve investor confidence in the reported accounting information. The empirical evidence from this study enhances the understanding of the corporate governance disclosure environment in Egypt as one of the emerging markets in the Middle East.     

The influence of disclosure policy on analyst behavior: The case of segment data

More transparent disclosure reduces the effort required to process reported information. The adoption of Statement of Financial Accounting Standards (SFAS) No. 131, Disclosures about Segments of an Enterprise and Related Information, increased the transparency of segment information reported by diversified firms. Using a long sample window (1988–2007) and a difference-in-difference design, this paper examines the association between corporate diversification and analysts' efforts—as reflected in analysts' idiosyncratic information precision and analyst consensus—across the old SFAS No. 14 and the new SFAS No. 131 segment reporting regime. Results indicate that SFAS No. 131 has improved segment reporting such that analysts need to invest relatively less effort generating idiosyncratic information when issuing forecasts for diversified firms. Given that analysts' information gathering efforts are costly, these findings are of interest to policy makers when assessing whether the intended reporting objectives of SFAS No. 131 are being met in a cost effective manner.     

Risk disclosure and cost of equity: The Spanish case

In this paper we make an empirical study of the relationship between risk disclosure and the cost of equity. In particular, the objective being pursued is to contrast whether or not the cost of equity for the company is related to its financial and non-financial risk disclosure. Our results show no statistically significant relationship between the latter and the cost of equity; and a statistically significant relationship, with a positive sign, between this cost and financial risk disclosure. This suggests that company risk disclosures appear to introduce unknown contingencies and risk factors rather than only update information about known risks.     

Corporate environmental disclosure and political connection in regulatory and leadership changes: The case of China

With a rapid increase of corporate environmental disclosure in developing countries, more attention is drawn to the extent to which this increase is influenced by corporate political connection. This paper focuses on China, a country experiencing increasing tensions between fast economic growth and heavy environmental pollution, complicated by high levels of political connections. A more important context in China is a historical leadership change entangled with significant regulatory reform to tackle corruption in 2013–14. Using hand-collected data from heavily polluting companies in 2012 and 2015 respectively, this study finds that there is a positive association between political connections of corporate chairmen and environmental disclosure levels in 2015 but not in 2012, suggesting that corporate disclosure behaviour has become more politically motivated after the regulatory and leadership change. There has been a significant improvement in environmental disclosure quality and this improvement is prominent in firms with politically connected chairmen. Although the regulatory change to eliminate corruption has led to substantial reductions in political connections of CEOs and senior executives, change associated with corporate chairmen is marginal. These results imply that the improvement of environmental disclosure is related more to the greater political intervention enabled by the leadership shift and power consolidation during the anti-corruption campaign than to the regulatory change to reduce political shield.     

The board's role in risk disclosure: an exploratory study of Italian listed state-owned enterprises

The determinants of risk disclosure in the annual reports of listed state-owned enterprises (SOEs) have yet to be fully explored. This paper examines the potential impact of the composition of the boards of directors and other company-specific features on risk disclosure levels. The presence of women on a board made a significant difference to risk disclosure, as did the age of board members. Board directors having an accounting or finance/business qualification affected risk disclosure negatively; company size and an internet visibility were positively related to risk disclosure. Although an Italian study, the lessons here will have application to academia and to practitioners, policy-makers and standard-setters worldwide.     

The association between risk disclosure and firm characteristics: a meta-analysis

The empirical literature on the determinants of risk disclosures offers mixed results. This complicates efforts among stakeholders to understand the factors affecting firms’ decision to report risk information. The aim of our paper is to analyze the findings of 42 empirical studies using a meta-analysis technique. We examine whether differences in the findings are attributable to random error or due to legal and institutional systems, uncertainty avoidance, disclosure regime (mandatory vs. voluntary), industry types, and the proxies used to measure corporate characteristics. We find that all moderators affect the relationship between corporate size and risk reporting. Legal system, disclosure regime, industry types, and leverage ratio measurement moderate the association between leverage ratio and risk disclosure. Industry types and uncertainty-avoidance level affect the relationship between profitability and risk disclosure. Finally, the association between risk factor and risk disclosure is moderated by industry types. We discuss the implications of our findings and offer suggestions for future research.     

The Impact of Ownership Structure On Corporate Debt Policy: a Time-Series Cross-Sectional Analysis

This study examines the influence of agency costs and ownership concentration on the capital structure of the firm. Of particular interest is the composition of equity ownership as a determinant of overall capital structure and the dynamic adjustment of capital structure to changes in the equity ownership. Results indicate that the distribution of equity ownership is important in explaining overall capital structure and that managers do reduce the level of debt as their own wealth is increasingly tied to the firm. It is also noted that the time-series component is important in resolving the conflicting results reported in prior research.