The association between voluntary disclosure and corporate governance in the presence of severe agency conflicts

Ana Gisbert and Begoña Navallas

Advances in accounting, 2013, vol. 29, issue 2, 286-298

Abstract: Agency conflicts between different types of investors are particularly severe in the presence of high family and block-holder ownership. By focusing on a setting characterised by high ownership concentration, we study the role of independent directors in promoting transparency through increased disclosure. In our tests, we use a sample of Spanish firms and, consistent with prior work, show that the presence of these directors is strongly associated with increased voluntary disclosure. Additionally, we find that when an executive director takes on Chair responsibilities the level of voluntary information is reduced, creating potential conflicts with the role of independent directors. Our results suggest that a strong legal framework holds firm-level clashes of interest in check. We conclude that this regulatory environment can create sufficient incentives to bring together the interests of minority and majority shareholders and guarantee an efficient monitoring role of independent directors. However, results suggest that other mechanisms should be reinforced in order to improve the role of governance control on agency relationships, particularly in the case of the concentration of Chair and executive responsibilities.

Keywords: Board composition; Independent directors; Agency conflicts; Ownership concentration; Voluntary disclosure (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:advacc:v:29:y:2013:i:2:p:286-298

DOI: 10.1016/j.adiac.2013.07.001

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