Impact of Board Independence on Community Disclosures Quality

Abstract

This study investigates the link between board independence and the quality of community disclosures in annual reports. Using content analysis and a panel dataset from the UK FTSE 350 companies, the results show a statistically significant relationship between board independence, measured by proportion of non-executive directors and the quality of community disclosures, while other corporate governance and firm specific variables are held constant. The study indicates that companies with more non-executive directors are likely to disclose higher quality information of their community activities than others. This offers important insight to policy makers who are interested in achieving optimal board composition and on interaction of the firm with its corporate and extended environment through high quality disclosures. The originality of this paper is in the fact that it is the first to specifically examine the relationship between outside directors and community disclosures in annual reports. The paper contributes both to the corporate governance and community disclosure literature.