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The effectiveness of board of directors’ characteristics in mandatory disclosure compliance

Author

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  • Mishari M. Alfraih

Abstract

Purpose - The purpose of this paper is to investigate the relationship between the characteristics of the board of directors and mandatory disclosure compliance (measured by International Financial Reporting Standards requirements) in firms listed on the Kuwait Stock Exchange (KSE) in 2010. Design/methodology/approach - Several characteristics are used to assess the effectiveness of the board of directors: number of members, gender diversity, CEO duality, multiple directorships, the proportion of family members on the board and the presence of a member of the ruling family of Kuwait. Mandatory disclosure compliance is measured using a self-constructed, item-based index. A regression model tested the paper’s hypotheses. Findings - After controlling for firm-specific characteristics, it was found that board size, gender diversity and multiple directorships were positively correlated with compliance, while CEO duality and the proportion of family members on the board were negatively correlated with compliance. Research limitations/implications - Potential limitations stem from both the nature of the sample and the dataset. The small sample reflects the size of the KSE and the limited timeframe (a one-year period). Nevertheless, this paper provides some interesting insights. A longitudinal study would provide more comprehensive insights into the relationship between the characteristics of the board of directors and mandatory disclosure compliance over time. Practical implications - The findings highlight the effectiveness of board of directors’ characteristics in promoting mandatory accounting compliance. As disclosure is fundamental for the effective functioning of capital markets and sound investments, a direct implication is that the quality of financial reporting can be improved by taking these characteristics into account. Originality/value - The paper contributes to the literature on the determinants of mandatory accounting compliance. The findings highlight the importance of the board of directors’ role in enhancing transparency and ensuring the quality of financial reporting. The findings will be particularly valuable to those involved in the appointment of directors, who should be aware of the influence of the configuration and characteristics of the board on compliance.

Suggested Citation

  • Mishari M. Alfraih, 2016. "The effectiveness of board of directors’ characteristics in mandatory disclosure compliance," Journal of Financial Regulation and Compliance, Emerald Group Publishing Limited, vol. 24(2), pages 154-176, May.
  • Handle: RePEc:eme:jfrcpp:v:24:y:2016:i:2:p:154-176
    DOI: 10.1108/JFRC-07-2015-0035
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    Citations

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    Cited by:

    1. Siti Amalia & Dadang Lesmana & Yanzil Azizil Yudaruddin & Rizky Yudaruddin, 2022. "The Impact of Board Structure on Voluntary Environmental and Energy Disclosure in an Emerging Market," International Journal of Energy Economics and Policy, Econjournals, vol. 12(4), pages 430-438, July.
    2. George Drogalas & Michail Nerantzidis & Dimitrios Mitskinis & Ioannis Tampakoudis, 2021. "The relationship between audit fees and audit committee characteristics: evidence from the Athens Stock Exchange," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 18(1), pages 24-41, March.
    3. Amal Yamani & Khaled Hussainey & Khaldoon Albitar, 2021. "Does Governance Affect Compliance with IFRS 7?," JRFM, MDPI, vol. 14(6), pages 1-23, May.
    4. Tsalavoutas, Ioannis & Tsoligkas, Fanis & Evans, Lisa, 2020. "Compliance with IFRS mandatory disclosure requirements: A structured literature review," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 40(C).
    5. Norazlin Ahmad & Irene Wei Kiong Ting & Imen Tebourbi & Qian Long Kweh, 2022. "Non-linearity between family control and firm financial sustainability: moderating effects of CEO tenure and education," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 12(4), pages 719-741, December.
    6. Maria Jose Murcia, 2021. "Progressive and Rational CSR as Catalysts of New Product Introductions," Journal of Business Ethics, Springer, vol. 174(3), pages 613-627, December.
    7. Ali Meftah Gerged, 2021. "Factors affecting corporate environmental disclosure in emerging markets: The role of corporate governance structures," Business Strategy and the Environment, Wiley Blackwell, vol. 30(1), pages 609-629, January.
    8. Gurdgiev, Constantin & Ni, Qiuxin, 2023. "Board diversity: Moderating effects of CEO overconfidence on firm financing decisions," Journal of Behavioral and Experimental Finance, Elsevier, vol. 37(C).

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