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The association between disclosure of forward-looking information and corporate governance mechanisms: Evidence from the UK before the financial crisis period

Al-Najjar, Basil and Abed, Suzan (2014) The association between disclosure of forward-looking information and corporate governance mechanisms: Evidence from the UK before the financial crisis period. Managerial Auditing Journal, 29 (7). pp. 578-595. ISSN 0268-6902

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Abstract

Purpose:
– This paper aims to witness the importance of corporate governance mechanisms and investigates the relationship between the quality of disclosure of forward-looking information in the narrative sections of annual reports and the governance mechanisms for non-financial UK companies.

Design/methodology/approach:
– Computerized content analysis using QSR NVivo 8 is used to measure the extent of forward-looking information in the narratives of the annual reports for 238 companies listed in the London Stock Exchange. Cross-sectional regression analysis is used to examine the impact of the corporate governance mechanisms on forward-looking information.

Findings:
– The results show that board size and the independence of the audit committee are associated with the level of voluntary disclosure of forward-looking information.

Research limitations/implication:
– One limitation of this study is that in controls for the effect of the financial crisis period, by selecting a representative year for a five-year period, 2006. The authors argument in using this year is based on the fact that the main variables of interest do not vary significantly with time, the cross-sectional analysis of the selected period will provide a fair view of the last five year-period.

Practical implications:
– The authors report the importance of some governance practices in the UK, such as the role of the board members as well as the importance of audit committee independence.

Originality/value:
– This paper contributes to the literature by using computerized content analysis to examine the relation between corporate governance mechanism and disclosure quality of forward-looking information using sample of companies before financial crisis period. The authors also examine governance mechanisms that are under-researched in the field of forward-looking disclosure.

Item Type: Article
Uncontrolled Keywords: Corporate governance, Board independence, Audit committee, Disclosure quality, Forward-looking information, Governance mechanism, M4
Subjects: H Social Sciences > HG Finance
Schools: Huddersfield Business School
Related URLs:
Depositing User: Basil Al-Najjar
Date Deposited: 14 Aug 2017 08:48
Last Modified: 14 Aug 2017 08:48
URI: http://eprints.hud.ac.uk/id/eprint/32773

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