Corporate Governance and Forward-Looking Information Disclosure: Evidence from a Developing Country

Abstract

ABSTRACT The study examines the effect of corporate governance mechanisms on the disclosure of forward-looking information by firms listed on the Zimbabwe Stock Exchange (ZSE). The study covers the year 2013, a period of economic turmoil and a high level of market speculation. The governance mechanisms considered are board size, board independence, and institutional ownership. Multiple regression analysis is used in the study in estimating the relationship between corporate governance variables and forward-looking information disclosure. The empirical results show a statistically significant and positive relationship between the proportion of independent directors on a corporate board and firms’ disclosure of forward-looking information. The result suggests that the inclusion of more independent directors on corporate boards could improve information disclosure and enhance transparency. Board size and institutional ownership, however, do not have any significant relationship with forward-looking information disclosure. The study contributes to the literature on corporate governance and forward-looking information. Specifically, it contributes to the literature by demonstrating that forward-looking information disclosure in Zimbabwe is associated with board independence. The finding will serve as a reference for the many stakeholders who are advocating for the inclusion of more independent directors on corporate boards. Also, it is expected that the result would engender discussions on forward-looking information disclosure among market participants and regulators in a bid to enhance transparency in the market.