Abstract
Although there has been considerable research on the impact of corporate governance on corporate voluntary disclosure, empirical evidence on how governance affects compliance with mandatory disclosure requirements is limited. We contribute to governance and disclosure literature by examining the impact of corporate governance on compliance with IFRS 7 for the banking sector in Gulf Cooperation Council (GCC). We use a self-constructed disclosure index to measure compliance with IFRS 7. We use regression analyses to examine the impact of board characteristics, audit committee characteristics and ownership structure on compliance with IFRS 7. Using a sample of 335 bank-year observations for GCC listed banks over the period 2011–2017, we report evidence that corporate governance variables affect compliance with IFRS 7. However, the significance of these variables depends on the type of the regression model used. Our findings suggest that governance matters for mandatory disclosure requirements. So to improve the level of compliance, regulators, official authorities, and policymakers should intensify their efforts toward improving corporate governance codes, following up their implementation and enhancing the enforcement mechanisms.
Highlights
Prior research attributes the low level of compliance with International Financial Reporting Standards (IFRS) to the absence of adequate enforcement regulations (Alfaraih 2009; Al Mutawaa and Hewaidy 2010; Al-Shammari 2011; Alanezi and Albuloushi 2011; Tsalavoutas 2011; Al-Jabri and Hussain 2012; Bova and Pereira 2012; Santos et al 2013)
This study examines the impact of several corporate governance mechanisms, including: board attributes, the audit committee (AC) attributes (AC size, AC independence, AC meeting frequency), and ownership attributes and their effects on the degree of compliance
This study identifies the association between different corporate governance mechanisms and the compliance level with IFRS 7 in banks
Summary
Prior research attributes the low level of compliance with International Financial Reporting Standards (IFRS) to the absence of adequate enforcement regulations (Alfaraih 2009; Al Mutawaa and Hewaidy 2010; Al-Shammari 2011; Alanezi and Albuloushi 2011; Tsalavoutas 2011; Al-Jabri and Hussain 2012; Bova and Pereira 2012; Santos et al 2013). The goal of the paper is to examine the impact of corporate governance mechanisms on the compliance with IFRS 7 standard. Our research question is: “Does corporate governance mechanisms affect the compliance levels of IFRS 7 standard by banks in Gulf Cooperation Council (GCC)”? Despite growing awareness of the significant role of governance in GCC, especially in improving disclosure and compliance with regulations, it is still in its early stages and faces challenges with enforcement mechanisms (Swedan and Ahmed 2019). Our paper offers a novel contribution to governance and IFRS literature by providing the first empirical evidence on the impact of corporate governance mechanisms on the compliance with IFRS 7 standard
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