Corporate Governance, Executive Directors and Level of Voluntary Disclosure: The Case of Public Listed Companies in Thailand

Jakkravudhi Chobpichien,Daing Nasir Ibrahim,Hasnah Haron

doi:10.32890/mmj.12.1-2.2008.8952

Jakkravudhi Chobpichien, Daing Nasir Ibrahim + Show 1 more

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https://doi.org/10.32890/mmj.12.1-2.2008.8952

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Abstract

This paper extends the literature on voluntary disclosure by reference to a developing country, namely Thailand, through a study of 70 voluntary disclosure items in the corporate annual reports of 317 public listed companies in 2004. The study examined the relationship between the level of voluntary disclosure and a single characteristic of corporate governance characteristics, namely the quality of the board of directors. It further examined the influence of the executive directors on this relationship. The findings suggested that the quality of the board of directors is positively associated with the level of voluntary disclosure, and this association appears to be weaker for firms with an executive director that has the family member, largest shareholder involved compared to the non-family member, largest shareholder and a high concentration of executive directors’ ownership compared to a low concentration of executive directors’ ownership. This effect is further exacerbated when board of directors’ quality levels increase. It was found that an executive director that has the family member, largest shareholder involved, and a high concentration of executive directors’ ownership are quasi moderators, which means they are both an independent and a moderating variable. As control variables, size of company, auditor type, and earnings return were found to have a significant influence on the level of voluntary disclosure. These results have important implications for good corporate governance policy formulation.

Highlights

Disclosure by firm managers represents an opportunity to reduce the information asymmetry that exists between firm managers and investors
Hierarchical Regression Results From Hierarchical Regression results the effects of control variables on dependent variables can be answered using the output from step 1, the effects of independent variables on dependent variables can be answered using the output from step 2, and moderating role of moderating variables on relationship between independent variables and dependent variables can be answered using the output from step 3 and step 4
Given that the sample was made up of 317 nonfinancial listed companies in Thailand, these higher earnings return, higher total assets, and the existence of big audit firm size tend to exhibit higher disclosures. This might indicate that increased level of voluntary disclosure is driven by increased earnings return, total assets, and having the big audit firm as auditor. These results indicated that firm characteristic which can be associated with agency theory, information and political costs, proprietary costs, and capital need measured by firm size, would be a positive control variable in hierarchical regression analysis to examine the effect of the quality of board of directors and ownership structure of the firm’s corporate governance structure on the level of voluntary disclosure

Summary

Introduction

Disclosure by firm managers represents an opportunity to reduce the information asymmetry that exists between firm managers and investors. This is because there exist a negative relationship between the disclosure levels of the companies and information asymmetry. The incentive to disclose in annual reports is that firm managers can reduce investors’ concern as to whether the management is acting in their best interests. Managers may choose to disclose more than is mandated by corporate law. Such disclosure is termed voluntary disclosure; the greater the disclosure by companies in the annual reports, the greater the transparency (Balachandran & Bliss, 2004)

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