Product Market Competition and Corporate Governance Disclosure: Evidence from the UK

In this study we measure multiple dimensions of product market competition and examine their impacts on corporate governance disclosure, based on a sample of UK public firms over the period 2001 to 2009. We use factor analysis to
explore the different dimensions of product market competition; and regression models to analyse the association between multiple dimensions of product market competition and corporate governance disclosure. We find that firms in less competitive industries have significantly more corporate governance disclosure. Furthermore, we detect a positive association between corporate governance
disclosure and board independence, as well as audit committee independence. This suggests that firms with better corporate governance tend to disclose more information to external investors. Overall the findings support the view that managers use more corporate governance disclosure as a substitute for the
external disciplinary force of product market competition.