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Board ownership, audit committees’ effectiveness, and corporate voluntary disclosures

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  • M. Akhtaruddin
  • Hasnah Haron

Abstract

Purpose - The aim of the paper is to examine the linkages between board ownership, audit committees' (ACs) effectiveness in terms of the proportion of independent non‐executive directors (INED) and expert members on the AC and corporate voluntary disclosures. Design/methodology/approach - The paper is based on a sample of 124 public listed companies in Malaysia for studying differences in corporate governance characteristics which affect the financial disclosure. Findings - The empirical results indicate that board ownership is associated with lower levels of voluntary disclosures. The result is consistent with the notion that board ownership increases agency costs resulting from information asymmetry between firm management and outsider investors. The negative relationship between board ownership and corporate voluntary disclosure is, however, weaker for firms with higher proportion of INED on the AC indicating that INED moderate board ownership/corporate voluntary disclosure relationship. Overall, the findings lend support for firms with a higher level of board ownership to include more independent directors on the AC to increase disclosure levels and reduce information asymmetry between firm management and investors. Originality/value - The paper demonstrates the usefulness of corporate governance factors mainly board ownership and effective AC on financial reporting practices. It is expected that this research will have important policy implication to reduce information asymmetry and improves corporate governance.

Suggested Citation

  • M. Akhtaruddin & Hasnah Haron, 2010. "Board ownership, audit committees’ effectiveness, and corporate voluntary disclosures," Asian Review of Accounting, Emerald Group Publishing Limited, vol. 18(3), pages 245-259, September.
    • Handle: RePEc:eme:arapps:v:18:y:2010:i:3:p:245-259
    DOI: 10.1108/13217341011089649
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    References listed on IDEAS

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    2. STEFANESCU Cristina Alexandrina, 2014. "Corporate Governance „Actors”’ Capability And Risk Information Transparency – Empirical Study On European Banking System," Studies in Business and Economics, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 9(2), pages 98-107, August.
    3. Cristina Alexandrina Stefanescu, 2013. "How Do Ownership Features Affect Corporate Governance Disclosure ? - The Case of Banking System," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 9(2), pages 37-51, April.
    4. Abdullah, Azrul & Ku Ismail, Ku Nor Izah, 2015. "Hedging Activities Information and Risk Management Committee Effectiveness: Malaysian evidence," MPRA Paper 85026, University Library of Munich, Germany.
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    6. Khaled Ahmad Kharashgah & Noor Afza Binti Amran & Rokiah Binti Ishak, 2019. "The Impact of Audit Committee Characteristics on Real Earnings Management: Evidence from Jordan," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 9(4), pages 84-97, October.
    7. Hasan, Rashedul & Siraj, Siti Alawiah, 2017. "Toward Developing a Model of Stakeholder Trust in Waqf Institutions," Islamic Economic Studies, The Islamic Research and Training Institute (IRTI), vol. 25, pages 85-109.
    8. Mar Arenas-Parra & Susana Álvarez-Otero, 2020. "CSR Disclosure: The IPO Case," Sustainability, MDPI, vol. 12(11), pages 1-22, May.
    9. Maadi Bakor Omar & Azhar B Abdul Rahman & Fathilatul Zakimi bin Abdul Hamid, 2018. "The Association between Corporate Governance and Disclosure of Audit Committee Characteristics: A Conceptual Model for the Saudi Listed Companies," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 8(3), pages 325-335, July.
    10. Abdullah, Azrul Bin & Ismail, Ku Nor Izah Ku, 2018. "Hedging Activities Information and Risk Management Committee Effectiveness: Malaysian evidence," SocArXiv kxfqe, Center for Open Science.
    11. Ala’ Hussein Albawwat & Mohamad Yazis Ali Basah, 2015. "The Impact of Shariah Approved Companies on the Relationship between Corporate Governance Structure and Voluntary Disclosure of Interim Financial Reporting in Jordan," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 5(2), pages 66-85, April.
    12. MUNTHER Al-Nimer, 2019. "Effect Of Corporate Governance Rules On Voluntary Disclosure In Jordanian Corporations Listed With The Amman Stock Exchange (Ase): (An Empirical Study)," Studies in Business and Economics, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 14(1), pages 154-168, April.
    13. Sumaia Ayesh Qaderi & Turki Raji Alhmoud & Belal Ali Abdulraheem Ghaleb, 2020. "Audit Committee Features and CSR Disclosure: Additional Evidence From an Emerging Market," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(5), pages 226-237, October.
    14. Hichem Khlif & Kamran Ahmed & Mohsen Souissi, 2017. "Ownership structure and voluntary disclosure: A synthesis of empirical studies," Australian Journal of Management, Australian School of Business, vol. 42(3), pages 376-403, August.
    15. Rupjyoti Saha & K. C. Kabra, 2020. "Corporate Governance and Voluntary Disclosure: A Synthesis of Empirical Studies," Business Perspectives and Research, , vol. 8(2), pages 117-138, July.
    16. Nicola Raimo & Filippo Vitolla & Arcangelo Marrone & Michele Rubino, 2021. "Do audit committee attributes influence integrated reporting quality? An agency theory viewpoint," Business Strategy and the Environment, Wiley Blackwell, vol. 30(1), pages 522-534, January.
    17. Shivan Sarpal, 2017. "Analyzing Performance Implications of Selected Audit Committee Characteristics: A Study of Indian Corporate Sector," Business Perspectives and Research, , vol. 5(2), pages 137-150, July.
    18. Waseem, Fareeha, 2023. "Impact of Managerial Entrenchment on Firm Performance," OSF Preprints hmuab, Center for Open Science.
    19. Anis Chariri & Indira Januarti & Etna Nur Afri Yuyetta, 2017. "Firm Characteristics, Audit Committee, and Environmental Performance: Insights from Indonesian Companies," International Journal of Energy Economics and Policy, Econjournals, vol. 7(6), pages 19-26.
    20. Tong Sheng & Bingquan Fang & Xiaoqian Lu & Xingheng Shi & Chaohai Shen & Xiaolan Zhou, 2022. "The Relationship between Corporate Social Responsibility, Global Investment, and Equity Incentives," Sustainability, MDPI, vol. 14(23), pages 1-27, December.
    21. Tahseen Mohsan Khan & Safia Nosheen & Naveed ul Haq, 2020. "Corporate governance mechanism and comparative analysis of one-tier and two-tier board structures: evidence from ASEAN countries," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 17(2), pages 61-72, September.
    22. Samaha, Khaled & Khlif, Hichem & Hussainey, Khaled, 2015. "The impact of board and audit committee characteristics on voluntary disclosure: A meta-analysis," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 24(C), pages 13-28.
    23. Rida A. Ghaffar Sheikh & Abdullah. & Muhammad Hashim Shah, 2019. "Impact of Audit Committee Characteristics on Voluntary Disclosures: Evidence from Pakistan," Asian Journal of Economics and Empirical Research, Asian Online Journal Publishing Group, vol. 6(2), pages 113-119.
    24. Johnson Kolawole OLOWOOKERE & Tirimisiyu Kunle LASISI, 2021. "Audit Committee Capabilities And Internet Financial Reporting Of Listed Financial Firms In Nigeria," Business Excellence and Management, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 11(3), pages 64-83, September.

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