The determinants of forward-looking disclosure: A corporate governance perspective

Abstract

The main objective of this study is to explore empirically the corporate governance mechanisms in UAE that may affect the extent to which forward-looking information is disclosed. This study utilizes a sample of firms that are listed in either the Dubai Financial Market or the Abu Dubai Securities Market. It uses the accounting and market data available for 2007-2009. This study concludes that three of the corporate governance mechanisms [i.e., institutional investors; ownership (> 10%); debt ratio] have a negative impact on the level forward-looking information disclosure; whereas the governmental investors and ownership (5-10%) are found to have a positive effect on the level of forward-looking information disclosure. These results raise questions about the validity of the "active monitoring hypothesis", which states that the presence of institutional investors should increase the level of disclosure, and also about the agency argument which assumes that debt is a good mechanism to discipline management