Voluntary Information Disclosure and Corporate Governance: The Empirical Evidence on Earnings Forecasts

This study examines the association between board composition and voluntary disclosure in annual reports. In particular, it addresses the incentives within the agency theory framework for both inside and independent directors to disclosure additional information voluntarily. Further, it provides evidence on the relation between the overall total voluntary disclosure and the components of voluntary disclosure, such as forward looking, strategic, non-financial and historical financial disclosures and board composition. Our sample is based on 181 Australian companies. We have developed and hand-collected 67 items from annual reports to develop the total voluntary disclosure index and the sub-indices of voluntary disclosure. Using two-stage multivariate analyses, our results provide some important insights. First, we find that there is a positive association between board composition and the voluntary disclosure of information in annual reports. Second, we also find that independent boards provide more voluntary disclosure of forward looking information and strategic information. However, board structure has no bearing on the voluntary disclosure of non-financial and historical financial information. Our findings are enhanced by different empirical specifications and sensitivity tests.

ABSTRACTIn the face of the dilemma between disclosure willingness and disclosure quality in voluntary information disclosure regulation, alongside prevalent violations in voluntary disclosure practices, it is necessary to further analyze whether random on‐site inspection is an effective approach of regulating voluntary disclosure. This paper examines the impact of the China Securities Regulatory Commission's (CSRC) randomized inspections on voluntary information disclosure, focusing on voluntary earnings forecasts. Using a sample of Chinese A‐share listed companies from 2016 to 2022, the study explores whether the “double random, one open” effectively resolves the conflicting issues between disclosure quality and willingness in the regulation of voluntary information disclosures. Our findings indicate that after being included in the CSRC's randomized inspection list, companies show a significant improvement in the quality of their voluntary earnings forecast disclosures, without a reduction in their willingness to disclose. Mechanism analysis reveals that randomized inspections enhance the quality of voluntary earnings forecasts through direct deterrence, by increasing the intensity of regulatory penalties, and indirect deterrence, by attracting market participants, media, and regulatory attention. Heterogeneity analysis suggests that such deterrence effect is more pronounced in regions with higher regulatory pressure and in cases where resampling selection is employed. Heterogeneity analysis based on firm characteristics indicates that the deterrent effect of randomized on‐site inspections is more pronounced in smaller firms and non‐state‐owned enterprises. Economic consequence analysis shows that enhancing the quality of voluntary earnings forecasts through randomized on‐site inspections can help reduce the risk of stock price crashes. Additionally, randomized inspections may lead to more conservative disclosures by listed companies, expanding the width of earnings forecasts. However, the reduction in the precision of management earnings forecasts would not result in negative economic consequences. In the context of inadequate regulation of voluntary information, this paper provides feasible solutions for further standardizing the regulation of voluntary disclosure.

Purpose – This paper aims to make a comparison, different from existing literature solely focusing on voluntary earnings forecasts and ex post earnings surprise, between the effects of mandatory earnings surprise warnings and voluntary information disclosure issued by management teams on financial analysts in terms of the number of followings and the accuracy of earnings forecasts. Design/methodology/approach – This paper uses panel data analysis with fixed effects on data collected from Chinese public firms between 2006 and 2010. It uses an exogenous regulation enforcement to minimise the endogeneity problem. Findings – This paper finds that financial analysts are less likely to follow firms which mandatorily issue earnings surprise warnings ex ante than those voluntarily issue earnings forecasts. Moreover, ex post, they issue less accurate and more dispersed forecasts on former firms. The results support Brown et al.’s (2009) finding in the USA and suggest that the earnings surprise warnings affect information asymmetries. Practical implications – This paper justifies the mandatory earnings surprise warnings policy issued by Chinese Securities Regulatory Commission in 2006. Originality/value – Mandatory earnings surprise is a unique practical regulation for publicly listed firms in China. This paper, for the first time, provides empirical evaluation on the effectiveness of a mandatory information disclosure policy in China. Consistent with existing literature on information disclosure by public firms in other countries, this paper finds that, in China, voluntary information disclosure captures more private information than mandatory information disclosure on corporate earnings ability.

This paper argues that the structure of corporate ownership varies systematically in ways that are consistent with value maximization. Among the variables that are empirically significant in explaining the variation in ownership structure for 511 U.S. corporations are firm size, instability of profit rate, whether or not the firm is a regulated utility or financial institution, and whether or not the firm is in the mass media or sports industry. Doubt is cast on the Berle-Means thesis, as no significant relationship is found between ownership concentration and accounting profit rates for this set of firms.

Voluntary information disclosure of an e-commerce platform under reselling, marketplace, and hybrid selling

This study examines the relationship between the voluntary disclosure of information about corporate governance practices and the intention to raise external finance. This relationship is examined by using corporate governance disclosures in the annual reports of Australian companies in 1994. Data from this year are used because in subsequent years Australian Stock Exchange regulations influenced listed companies to make disclosures about their corporate governance practices. Regression analysis indicates that the voluntary disclosure of corporate governance information is positively associated with the intention to raise equity capital, but not with the intention to raise debt capital.

The study examines whether the introduction of an accounting standard relating to the disclosure of financial instruments affects voluntary corporate disclosure, and the impact of proprietary and political costs on such disclosure decisions. Using the annual reports of 70 Australian listed companies over a period of 6 years giving 420 firm-year observations, this study investigates the comparative impacts of proprietary and political information costs on management’s voluntary disclosure decisions relating to financial instruments. The regulatory disclosure environment, the impact of proprietary costs (proxy by a firm’s investment growth opportunities) and political costs (proxy by a firm’s probability of financial distress, size of a company and negative media attention) relating to the voluntary disclosure of financial instruments were investigated. Results of this study provide evidence that the mandatory disclosure of non-proprietary information relating to financial instruments has resulted in an increase in the voluntary disclosure of related proprietary information. For the effects of proprietary and political costs, findings from the study suggest that a firm’s growth opportunities are significant in limiting voluntary disclosure of proprietary information in the period prior to regulation. Consistent with political cost hypothesis, legitimacy theory and media agenda-setting theory, the size of a company and high negative media attention are significantly positively related to voluntary corporate disclosure. However, financial distress has no effect on the voluntary disclosure of financial instruments-related information.

PurposeThe purpose of this paper is to provide an empirical evidence concerning the influence of Corporate governance and voluntary disclosures in annual reports: a post-International Financial Reporting Standards adoption evidence from an emerging capital market.Design/methodology/approachData were collected from the annual reports of all 22 listed non-financial firms over a five-year period. Using content analysis, the audited annual reports of the firms were scored on the extent of overall and four specific types of voluntary disclosures made. The panel data obtained were analyzed using a generalized ordinary least squares regression model.FindingsThe findings of the study show that voluntary disclosures among the firms are low even after the adoption of IFRS. Corporate governance attributes of board size and board leadership structure are significant determinants of the extent of voluntary disclosures made by the firms. However, board independence and auditor type exhibit only a significant positive effect on voluntary financial and forward-looking information disclosures.Research limitations/implicationsFirms’ voluntary information disclosure and governance variables were restricted to those in annual reports, which may partially reflect the reality of firms’ disclosure and governance practices.Practical implicationsThe present study offers useful insights to regulators of the capital market to strengthen monitoring of firms to ensure strict adherence to corporate governance best practice guidelines as a means of improving information environment.Originality/valueThis study is one of the very few ones in Africa, especially in the context of Ghana Stock Exchange, to use post-IFRS data and examine a disaggregated voluntary disclosure by firms.

With the explosion of COVID-19, a number of publicly traded companies in the pharmaceutical industry have thrown themselves into the development of novel coronavirus vaccines and therapeutics, and have voluntarily disclosed information about the development process. In this paper, six companies with different quality ratings of information disclosure in the pharmaceutical industry (refer to the results of the 2019 Shenzhen Stock Exchange quality assessment of information disclosure) were selected to explore the behavior and consequences of voluntary disclosure of information by listed companies in the pharmaceutical industry in China. The results show that voluntary disclosure of positive news will have a positive impact on the company’s share price. Companies with high disclosure quality ratings have lower price volatility before and after disclosure. Low-rated companies have volatile stock prices before and after disclosure, and the price gains are unsustainable for long periods of time, even falling back to lower levels than they were before disclosure. It is not the case that companies’ share prices do not fluctuate due to poor disclosure appraisal results, but rather they may cause a larger market reaction for the purpose of misleading investors. To some extent, this paper enriches the research on voluntary information disclosure of listed companies and will make listed companies understand the consequences of voluntary information disclosure on COVID-19-related issues, provide evidence for relevant supervisory authorities to regulate voluntary information disclosure further, and create a better voluntary information disclosure environment for China’s stock market.

PurposeThis paper aims to investigate the potential mediating effect of environmental disclosure on the relationship between corporate governance and the disclosure of social information by disaggregating Bloomberg ESG (Environmental-Social-Governance) scores. The polluting level of a company is examined for its potential moderating effect.Design/methodology/approachThe focus is on the S&P 500. A structural equation model (SEM) is proposed that considers the effects of governance board constructs on the voluntary disclosure of social information (S-score) mediated by the voluntary disclosure of environmental information (E-score). The model is fit separately for two groups of companies (high-polluting and low-polluting), and the path coefficients are compared.FindingsConsistent with prior research, board independence, gender diversity, and size positively impact voluntary environmental disclosure; board age is found to have a significant but negative effect. The estimated path coefficient from E-score to S-score is strong, positive, and significant; environmental disclosure fully mediates the relationship between corporate governance and social disclosure. This path coefficient is significantly greater for those companies in the high-polluting group.Originality/valueThe findings indicate that high-polluting companies may engage in increased voluntary disclosure of social information as reputation insurance. E-score fully mediates the relationship between corporate governance and S-score more strongly for high-polluting companies, suggesting this group is more likely to engage in and report on socially responsible behaviors to deflect attention away from environmental performance (i.e. greendeflecting).

PurposeThe purpose of this paper is to examine factors affecting fundraisers’ voluntary information disclosure on crowdfunding platforms based on risk-perception theory (RPT).Design/methodology/approachStructural equation modeling was employed to test the hypothesized relationships using data collected from China.FindingsThe authors found that plagiarism risk and financing risk are two important variables that influence fundraisers’ voluntary information disclosure. Specifically, plagiarism risk has a negative effect on fundraisers’ voluntary information disclosure, while financing risk has a positive effect on fundraisers’ voluntary information disclosure. Plagiarism risk is affected by information concerns, perceived control, project innovativeness, and quality of alternatives, while financing risk is affected by protection policy and information norms.Originality/valueThis study enriches crowdfunding research by identifying factors influencing fundraisers’ voluntary information disclosure and contributes to RPT by applying it in a new crowdfunding context.

Social and economic activities, like religion, entertainment, education, research, and the production of other goods and services, are carried on by different types of organizations, for example, corporations, proprietorships, partnerships, mutuals and nonprofits. There is competition among organizational forms for survival. The form of organization that survives in an activity is the one that delivers the product demanded by customers at the lowest price while covering costs. The characteristics of residual claims are important both in distinguishing organizations from one another and in explaining the survival of organizational forms in specific activities. This paper develops a set of propositions that explaim the special features of the residual claims of different organizational forms as efficient approaches to controlling agency problems. © M. C. Jensen and E. F. Fama, 1983 Michael C. Jensen, Foundations of Organizational Strategy Chapter 6, Harvard University Press, 1998. Journal of Law & Economics, Vol XXVI (June 1983) This document is available on the Social Science Research Network (SSRN) Electronic Library at: http://papers.ssrn.com/sol3/paper.taf?ABSTRACT_ID=94032 AGENCY PROBLEMS AND RESIDUAL CLAIMS

Based on the review of the relevant theory and empirical research of listed tourism companies’ voluntary information disclosure and performance. This paper selects 11 thematic tourism listed companies in Shanghai and Shenzhen Stock Exchange as the research samples, and applies empirical analysis to discuss the relationship between voluntary information disclosure and corporate performance of thematic tourism listed companies. The results show that: the overall level of voluntary information disclosure in China’s thematic tourism companies is moderate, and shows the trend of increasing year by year; The Return on Equity, Turnover of Total Assets and the Operating Income Growth Rate are positively related to the disclosure of voluntary information, and the Debt to Asset Ratio is negatively related to the disclosure of voluntary information.

PurposeThis paper contributes to the existing literature by extending the empirical work on the relationship between corporate governance and capital structure by analyzing the mediating role of cost of capital in the non-financial firms listed on the Pakistan Stock Exchange (PSX).Design/methodology/approachThe sample for this study includes non-financial firms listed on the Pakistan Stock Exchange (formerly Karachi Stock Exchange) for the period of 2004–2016. Based on 1800 firm-year observations, three approaches of panel data analysis are applied for the step-wise analysis of the underlying study. Firstly, Pooled OLS is applied. Secondly, fixed and random effect panel regression followed by the Hausman test to check the unobservable individual heterogeneity of the data. Hausman test indicates that the fixed-effects model is the most appropriate model for the sample panel data.FindingsThe study's findings are that board size, board composition, CEO/Chair duality, institutional ownership and managerial ownership have statistically significant direct effect on the firm's financing decisions. However, CEO/Chair duality, institutional ownership and managerial ownership have significant indirect effect on firm's capital structure decisions. The interesting finding of the paper is on the evidence of mediating role of cost of capital in the nexus of corporate governance and capital structure. Moreover, some conventional determinants of capital structure, including the firm's size, asset structure of the firm, profitability, business risk and growth, are found as determinants of capital structure decisions of the firms.Research limitations/implicationsThere are a few limitations to our study which could be addressed by upcoming research. We did not include all the four mechanisms of corporate governance including board structure, audit structure, compensation structure and ownership structure. However, we used only five important attributes including board size, board composition and CEO/Chair duality form board structure, managerial ownership and institutional ownership form ownership structure of corporate governance as our explanatory variables to examine their impact on the capital structure choices of the firms. Future studies may fill this research gap by involving some other attributes of corporate governance and analyzing their effectiveness and impact on value relevant capital structure decisions. Further, due to limited time and resources, we only tested the mediating role of cost of capital, hence, future researchers can analyze the mediating and moderating roles of different variables which may influence the relationship between corporate governance and capital structure choices of the firms.Practical implicationsThe study has many valuable guidelines and practical implications for the financial managers of the corporations. Our results will facilitate the policymakers in setting their corporate governance policies and practices and making the value relevant capital structure decisions in compliance with the implications of corporate governance mechanism. In addition, our study provides the empirical evidence in accordance with the argument that good governance practices, particularly the voluntary disclosures by the firm may reduce the information asymmetry which, ultimately, reduces the agency cost and the cost of capital for the firm. However, while deciding the financial policy of the corporations, managers can use our findings in order to assess the effectiveness of corporate governance practices employed by the firm in achieving the optimal capital structure at which the weighted average cost of capital is at its minimum level.Originality/valueThis paper contributes to the literature by investigating the mediating role of the cost of capital in the relationship between corporate governance and capital structure decisions of the firms. This paper provides empirical evidence that corporate governance indirectly affects capital structure decisions through the mediating role of cost of capital.

The purpose of this paper is to explore how a company’s voluntary information disclosure influences its stock price synchronicity and how the company’s financial status influences the relationship between voluntary information disclosure and stock price synchronicity. This study utilizes the panel regression model with the data of Shanghai and Shenzhen 300 Index constituent stocks from 2010 to 2017 in Chinese stock market to analyze the relationship between voluntary information disclosure and stock price synchronicity and how financial status influences the relationship. The results show that voluntary information disclosure is negatively related to stock price synchronicity. The financial status in general is likely to decrease stock price synchronicity. However the three different indictors, profitability, solvency and development ability, of financial status have different impacts on the relationship between voluntary information disclosure and stock price synchronicity. The company’s profitability strengthens the relationship of voluntary information disclosure and stock price synchronicity. While the solvency and the development ability have little impact on the relationship. It can be seen that investors are paying more attention to the intrinsic value of the companies and the quality of the Chinese stock market is obviously improving. Based on the results the paper proposes some useful suggestion in the end.