Are all outside directors created equal with respect to firm disclosure policy?

Luminita Enache (), Antonio Parbonetti () and Anup Srivastava ()
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Luminita Enache: University of Calgary
Antonio Parbonetti: University of Padua
Anup Srivastava: University of Calgary

Review of Quantitative Finance and Accounting, 2020, vol. 55, issue 2, No 5, 577 pages

Abstract: Abstract Empirical evidence on the association between outside directors and firms’ voluntary disclosures is mixed and controversial. We hypothesize that the outside directors do not represent a homogeneous group of people as considered in the literature. Using hand-collected data from a sample of biotechnology firms, we find that the aforesaid association differs based on the directors’ professional backgrounds. Our results are consistent with two ideas. First, an outside director’s influence on firm disclosure policy is shaped by her professional background. Second, firms match outside directors’ professional backgrounds with their disclosure policy. We cannot distinguish between the two explanations. Yet, we make an important contribution to the literature. We show that the impact and the selection prospects of outside directors are not as uniform as previously considered in the literature. Thus, the researchers examining financial disclosures must take into account the background characteristics of all outside directors, not just of those in the audit committee. And investor bodies must consider the background characteristics of candidates in their recommendation for outside-director selection.

Keywords: Biotechnology firms; Corporate governance; Voluntary disclosures; Proprietary costs; Outside directors (search for similar items in EconPapers)
JEL-codes: G14 G32 G34 M40 M41 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s11156-019-00852-1

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