Relationship Between Board Structure And Information Disclosure

There are three internal and one external governance mechanisms used for owners to govern managers to ensure they comply with their responsibility to satisfy stakeholders and shareholder’s needs. First, ownership concentration is stated as the number of large-block shareholders and the total percentage of the shares they own (Hitt, Ireland, Hoskisson, 2017, p. 317). Second, the board of directors which are elected by the shareholders. Their primary duty is to act in the owner’s best interest and to monitor and control the businesses top-level managers (Hitt, Ireland, Hoskisson, 2017, p. 319). Third, is the

Prior to the advent of the Sarbanes-Oxley Act of 2002, referred to herein as “SOX,” the board of directors’ pivotal role was to advise senior leaders on the organization’s strategy, business model, and succession planning (Larcker, 2011, p. 3). Additionally, the board had the responsibility for risk management identification and risk mitigation oversight, determining executive benefits, and approval of significant acquisitions (Larcker, 2011, p. 3). Furthermore, for many public organizations, audit committees existed before SOX and provided oversight of internal processes and controls. Melissa Maleske (2012) advised that the roles and responsibilities of the board were viewed “…from a perspective that the board serves management” (p. 2). In contrast, Maleske (2012) noted that SOX regulations altered the landscape “…to a perspective that management is working for the board” (p. 2). SOX expanded not only the duties of the board and the audit committee, but also the authority of these bodies (Maleske, 2012, p. 2).

My recommendation would be to sample years that are passed 2002 and on to get a more accurate result for the study. I felt like there was so much going on with testing before and after the events took into effect. Even though it was a good size of sample and enough quarters from where to gather information from the time frame plays an important role. The Regulation Fair Disclosure that took place in October 23, 2000 made a great impact towards the way information was not allowed to be disclosed. I feel that it took an effect on the results since the information was gathered that year and was dealing with information asymmetry. In Li, Ha and Nabar (2014) they conclude that there is a difference that exists between pre and post regulation fair disclosure. The authors mention how the stock prices after the fact were more precise in relation to stock splits than before regulation fair disclosure took place. Also, with Sarbanes Oxley Act taking effect in 2002 could also have more managers disclosing information more voluntarily than before it took effect. In Aftermath (2015) he states that SOX arose because of the number of scandals that had taken place. So, with this said it shows how the disclosing of information is important and now that it is implemented will help in lowering the risk of having unreliable information. On another note as for the equations that were used throughout the paper I find them quite interesting and understandable. As well as the variables that were used in the tables are clearly defined and the tables do provide evidence to sustain their

The policy should also include how the board members disclose their personal and financial interests and how they should deal with gifts or other incentives made to them in the course of their role on the Board. All Board Directors can declare all material facts or Financial Interests1 concerning the existence and nature of a potential Conflict of Interest and the relationship of any ‘Interested Director’.

According to Wharton School study, most companies de-listed their shares in an attempt to avoid the high costs of complying with the SOX Act, with some smaller companies listing costs of as high as $500,000 to comply. Some companies, however, de-listed to avoid outside monitoring and scrutiny, leading the study’s authors to suspect that firms were not being managed in the most efficient way or that their compensation was excessive. The study found that some of the firms with “higher free cash flow and lower-quality accounting” were more likely to “go dark” – to deregister from the SEC and become private firms (AP, 2004). Independence of board members may also place hardships on smaller companies. Many publicly listed small companies have few board members, and the chief financial officer may act in the capacity of other positions. Smaller firms may not have the resources necessary to recruit qualified individuals to meet independence requirements.

Not only the managements are responsible for a company’s accounting information, but also the board of directors and audit committee are more accountable. According to Turner and

Non-regulatory disclosures is not a waste of money, but is to spend the least amount of expenditure on gaining the largest amount of investment. Nowadays, companies prefer to find ways of maximizing the wealth not only for the organization but for the society due to an increase in the awareness of caring the environment and the entire society. Therefore, the non-financial statement, which is also known as non-regulatory disclosures, is to disclose issues related to social, environmental and the company’s performance (Choi & Wang 2009).

Disclosure required by most regulatory authorities in developed economies may be classified into two categories: (a) disclosure related to operations in the securities markets; and (b) disclosure required by publicly held companies subject to the jurisdiction of the regulatory authority. Disclosure related to the direct operations of securities markets concerns the relationships of security brokers and representatives to the corporate entities issuing the securities traded. Disclosure required by publicly held corporations subject to the jurisdiction of the regulatory authority includes almost all of what is generally considered to be the public disclosure requirements for corporations. These disclosure requirements include information pertaining to, “(a) the relationship between the management of a corporation and its auditors; (b) the nature of relationships between a corporation and any of its shareholders; (c) institutional investment relationships; (d) proxy requirements; (e) board and committee composition; (f) compensation for the board of directors; and (g) management compensation” (Securities Exchange Act of 1934 Title 12). Shareholder rights and proxy disclosure requirements resulted from the belief that the management of a public corporation can effectively frustrate shareholders’ efforts to participate in the management of

Information asymmetry, moral hazard, difference in attitude towards risk and difference in interest between shareholders versus directors are common agency problems that would usually be at the expense of shareholders (Mallin, 2007; Rahman, & Salim, 2010). For example, directors may have a wider range of economic and social needs (such as to maximize compensation, security, status and to boost their own reputation), while shareholders are interested only in maximizing return on investments. Furthermore, as directors are usually contracted to the company on short term basis, they may be eager for short-run payoffs within their contract term, whereas shareholders’ interest would be based on long-term success.

2. This article examines Swiss companies in relation to how board size affects the value of a firm. The study did not find significant correlation between board size having a negative impact on firm value or profitability; this is contrary to many previous studies ( e.g. Yermack, 1996). This article argues against the findings of Jensen (1993) and Lipton and Lorsch (1992), which stated that larger boards have a negative effect on firm value; in fact

If so, mandatory disclosure benefits informed customers, is neutral for uninformed customers, and harms the seller’’ (Fishman and Hagerty, 2003). Voluntary disclosure is where information is applicable to annual reports when carrying out decision making, however, is not considered a crucial part to financial reporting ‘’Mandatory disclosures provide no new-value information relevant to the capital market only when they establish the credibility of managers voluntary disclosures’’ (Gigler & Hemmer, 1998).

There is also significant research on why firms divest, however there is insufficient investigation of the link between different types of blockholders and subsequent divestment decisions. For example, Bates (2005) considers the use of cash proceeds following subsidiary sales between 1990 and 1998. In his study, he considers the proportional ownership of insiders on the likelihood of retaining versus payout to equity or debtholders. Considering these individuals have substantial ownership stakes, he examines a subset of large equity ownership. Overall, Bates provides shows mean inside ownership is higher for firms which pay out proceeds (6.8%) compared to firms which retain proceeds (5.5%) from divestitures. This is consistent with the argument insider equity ownership, by aligning incentives of insiders with shareholders, mitigates managerial agency costs. This is supported by past research that documents positive shareholder

This review seeks to provide an evaluation of the nine aspects of the research articles given below and the references for these articles are given at the end of the paper. Review has been done on four articles in order to find relationship between board size and performance of firms in context of different countries (United Kingdom, Ireland, China and Nigeria). The problems identified in this paper are listed below;

Abstract Corporate governance Organization for Economic Co-operation and Development (OECD) principles, objectives and standards. Transparency in doing business and its impact on the business performance. Background of good transparency. Transparency guidelines which can enhance the performance. Transparency’s impact. Corporate Governance Disclosure. Criteria to be considered for the strong

Jensen and Meckling divided shareholders into internal investors which has management right and external shareholders investors without vote right. Theoretically, the more the internal shareholder’s share the higher the firm value. The researchers also defined firm value as a function of ownership structure. Because ownership structure has links with corporate governance, it can have both positive and negative effects on corporation governance (Jiang 2004).