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The Association between Board Composition and Different Types of Voluntary Disclosure

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  • S. Lim
  • Z. Matolcsy
  • D. Chow

Abstract

This study examines the association between board composition and voluntary disclosure in annual reports. In particular, it addresses the incentives within the agency theory framework for both inside and independent directors to disclosure additional information voluntarily. Further, it provides evidence on the relation between the overall total voluntary disclosure and the components of voluntary disclosure, such as forward looking, strategic, non-financial and historical financial disclosures and board composition. Our sample is based on 181 Australian companies. We have developed and hand-collected 67 items from annual reports to develop the total voluntary disclosure index and the sub-indices of voluntary disclosure. Using two-stage multivariate analyses, our results provide some important insights. First, we find that there is a positive association between board composition and the voluntary disclosure of information in annual reports. Second, we also find that independent boards provide more voluntary disclosure of forward looking information and strategic information. However, board structure has no bearing on the voluntary disclosure of non-financial and historical financial information. Our findings are enhanced by different empirical specifications and sensitivity tests.

Suggested Citation

  • S. Lim & Z. Matolcsy & D. Chow, 2007. "The Association between Board Composition and Different Types of Voluntary Disclosure," European Accounting Review, Taylor & Francis Journals, vol. 16(3), pages 555-583.
    • Handle: RePEc:taf:euract:v:16:y:2007:i:3:p:555-583
    DOI: 10.1080/09638180701507155
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