IMPACT OF CORPORATE GOVERNANCE ON FINANCIAL DISCLOSURES: EVIDENCE FROM INDIA

Download This Article

Abstract

The paper aims at identifying impact of corporate governance variables i.e. board structure (board size, board independence, board activity and board busyness) and ownership structure (foreign promoters holding, institutional shareholding and CEO duality) on financial disclosures made by the Indian firms. Using cross sectional data of 325 listed firms for the financial year 2009-10, we compute financial disclosure score (using 171 checklist points) based on disclosure requirements of accounting standards. We find average disclosure score of 73%, maximum and minimum being 100% and 46% respectively. Our finding support agency theory in terms of monitoring role of board since board size is found to be significant however we do not find any influence of board independence on the disclosures. The study also supports resource dependency theory in terms of outside directorship which might provide exposure to different corporate environment, brings diverse perspectives and knowledge to the directors and this in turn leads to improved disclosures. We also support the notion that having foreign promoter shareholding improves disclosures.

Keywords: Financial disclosure, Board structure, CEO Duality, Ownership structure, Firm attributes

How to cite this paper: Raithatha, M., & Bapat, V. (2014). Impact of corporate governance on financial disclosures: Evidence from India. Corporate Ownership & Control, 12(1-9), 874-889. https://doi.org/10.22495/cocv12i1c9p10