Towards a More Transparent Disclosure for Corporate Sustainability: Focusing on the Regulation of Unfaithful Disclosure Designation

Jaehong Lee, Eunjoo Cho and Jong Sung Park
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Jaehong Lee: College of Business, Sangmyung University, Seoul 03016, Korea
Eunjoo Cho: Department of Business Administration, Sookmyung Women’s University, Seoul 03016, Korea
Jong Sung Park: Department of Business Administration, Sookmyung Women’s University, Seoul 03016, Korea

Sustainability, 2019, vol. 11, issue 22, 1-26

Abstract: This study explored the effect of corporate governance on disclosure transparency, coming from the changes of the largest shareholder and the designation as an unfaithful disclosure firm. In addition, the study verified whether this designation on a firm increases voluntary disclosure level the following year. According to results of analyzing nonfinancial firms listed in the Korea stock market from 2009 to 2017, the more frequently the largest shareholder changed in the recent three years, the significantly higher the possibility of the firm in being designated as an unfaithful disclosure firm. For firms that were designated as unfaithful disclosure firms, voluntary disclosure significantly increased the following year. These results were strengthened by the addition of several more analyses including quality of management forecasts, consideration of fixed-effects regression and the mediation modeling. These results imply the necessity for the supervision of authorities to take caution, while it shows the effectiveness of the unfaithful disclosure designation regulation in improving disclosure transparency.

Keywords: corporate sustainability; corporate transparency; frequent change of the largest shareholder; unfaithful disclosure designation; management earnings forecasts (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2019
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