Determinants and Consequences of Extended Disclosure under Concentrated Ownership Environment: The Indonesian Evidence Penentu dan Konsekuensi dari Pengungkapan yang Diperpanjang di bawah Lingkungan Kepemilikan Terkonsentrasi: Bukti Indonesia
Published:
Sep 4, 2019
Keywords:
voluntarily disclosure, concentrated ownership, corporate governance, independent director, economic consequences
Main Article Content
Abstract
This study is aimed at providing evidence in regard with (1) the economic consequences of quality of extended disclosure and (2) the influence of ownership and director char- acteristics on the quality of extended disclosure. Using 260 firm years of the Indonesian firms, this study finds that the increase of disclosure quality is found to have a positive correlation with the increase of share price five (5) days after the announcement date of financial reports and the increase of Return of Assets (ROA). In regard with ownership and director characteristics, this study finds that government ownership and size of board have a positive relationship with disclosure quality; while management and block-holder ownership are not relevant in increasing disclosure quality. It is also found that individual characteristics of director which are independence and financial expertise/background do not have any relationship with the quality of extended disclosure. From the study, it can be concluded that extended disclosure is an effective tool to increase the financial performances of a firm under a concentrated ownership environment such as in Indone- sia. Government and board directors are two players who induce firms to increase trans- parency through voluntarily disclosure.
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Copyright (c) 2019 Abdul Ghofar
This work is licensed under a Creative Commons Attribution 4.0 International License.
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References
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Bailey, W., Andrew Karolyi, G., & Salva, C. (2006). The economic consequences of increased disclosure: Evidence from international cross-listings. Journal of Financial Economics, vol. 81, no. 1, pp. 175-213.
Bauwhede, HV & Willekens, M. (2008). Disclosure on Corporate Governance in the Europian Union. International Review, vol. 16, no. 2, pp. 101-15.
Bertrand, M., Mehta, P. & Mullainathan, S. (2002). Ferreting out tunneling: an application to Indian business group. The Quarterly Journal of Economics, vol. 117, no. 1, pp.121-148.
Bhojraj, S. & Sengupta, P. (2003). Effect of corporate governance on bond ratings and yield: the role of institutional investors and outside directors. The Journal of Business, vol. 76, no. 3, pp. 455-475.
Bozec, Y & Bozec, R. (2007). Ownership Concentration and Corporate Governance Prac- tices: Substitution or Expropriation Effects? Canadian Journal of Administrative Sciences / Revue Canadienne des Sciences de l’Administration, vol. 24, no. 3, pp. 182-95.
Brammer, S., & Pavelin, S. (2006). Voluntary environmental disclosures by large UK com- panies. Journal of Business Finance & Accounting, vol. 33, no.7-8, pp. 1168-1188.
Bourveau, T & Schoenfed, T. (2017). Shareholders activism and Voluntary Disclosure.
Review of Accounting Studies, vol. 22, no. 3, pp. 1307-1339.
Boyson, N. & Mooradian, R. (2011). Corporate governance and hedge fund activism. Review Derivative Research, Vol. 14, No. 2, pp. 169-204.
Chau, G. K., & Gray, S. J. (2002).Ownership structure and corporate voluntary disclosure in Hong Kong and Singapore. The International Journal of Accounting, vol. 37, no. 2, pp. 247-265. Chau, G., & Gray, S. J. (2010). Family ownership, board independence and voluntary dis- closure: Evidence from Hong Kong. Journal of International Accounting, Auditing and Taxation,
vol. 19, no. 2, pp. 93-109.
Chen, C.J.P. & Jaggi, B. (2000). Association between independent non-executive directors, family control and financial disclosure in Hong Kong. Journal of Accounting and Public Policy, vol. 19, no. 4-5, pp. 285-310.
Claessens, S., & Fan, J. P. (2002). Corporate governance in Asia: A survey. International Review of finance, vol. 3, no. 2, pp. 71-103.
Claessens, S., Djankov, S. & Lang, L.H.P. (2000). The separation of ownership and control in East Asian corporations. Journal of Financial Economics, Vol. 58, No. 1-2, pp. 81-112.
Clarkson, P. M., Kao, J. L.& Richardson, G. D. (1994).The Voluntary Inclusion of Forecasts in the MD&A Section of Annual Reports. Contemporary Accounting Research, vol. 11, no. 1, pp. 423-450.
Cooke, T. E. (1989). Disclosure in the corporate annual reports of Swedish companies.
Accounting and Business Research, Vol. 19, No. 74, pp. 113-124.
Darmadi, S., &Sodikin, A. (2013). Information disclosure by family-controlled firms: The role of board independence and institutional ownership. Asian Review of Accounting, vol. 21, no. 3, pp. 223-240.
Denis, DK & McConnell, JJ.(2003). International Corporate Governance’, Journal of Finan- cial and Quantitative Analysis, vol. 38, no. 1, pp. 1-36.
Edmans, A. (2014). Block holders and Corporate Governance. Working Paper, No. 385.
London Business School.
Edmans, A. & Manso, G. (2011). Governance through trading and intervention: a theory of multiple blockholders. Review Financial Studies, Vol. 24, No. 7, pp. 2395-2428.
Facio, M. & Lang, L.H.P (2002). Ultimate ownership of Western European corporations.
Journal of Financial Economics, Vol. 65, No. 3, pp. 365-395
Fan, X. (2006). On factors affecting voluntary disclosure by listed companies. Securities Mar- ket Herald (in Chinese).
Ferguson, M. J., Lam, K.C.K., & Lee, G.M. (2002). Voluntary disclosure by state-owned enterprise listed on the stock exchange of Hong Kong. Journal of International Financial Man- agement and Accounting, Vol. 13, pp. 125-152.
García-Meca, E. & Sánchez-Ballesta, J. P. (2007). A meta-analytic vision of the effect of own- ership structure on firm performance. Corporate Governance: An International Review, vol. 15, no.5, pp. 879-892.
Goldstein, I. & Guembel, A. (2008). Manipulation and the allocational role of prices. Review Economics Studies, Vol. 75, No. 1, pp. 133-164.
Healy, P. M., Hutton, A. P., & Palepu, K. G. (1999). Stock performance and intermedia- tion changes surrounding sustained increases in disclosure. Contemporary Accounting Research, vol.16, no. 3, pp. 485-520.
Healy, P. M., &Palepu, K. G. (2001). Information asymmetry, corporate disclosure, and the capital markets: A review of the empirical disclosure literature. Journal of Accounting and Eco- nomics, vol. 31, no. 1, pp. 405-440.
Iatridis, G. (2008). Accounting disclosure and firms’ financial attributes: Evidence from the UK stock market. International Review of Financial Analysis, vol. 17, no. 2, pp. 219-241.
Jensen, M.C & Meckling, W.H. (1976). Theory of firm: managerial behavior, agency costs and ownership structure. Journal of Financial Economies, Vol. 3, No. 4, pp. 305-360.
Johnson, S., La Porta, R., Lopez-de-Silanes, F. & Shleifer, A. (2000). Tunneling. American Economics Review, Vol. 90, No. 2, pp. 22-27.
Karamanou, I. & Vafeas, N. (2005). The Association between corporate boards, audit com- mittees and management earning forecast: an empirical analysis. Journal of Accounting Research, Vol. 43, No. 3, pp. 453-486.
Khanna, N. & Mathews, R. (2012). Doing battle with short sellers: the conflicted role of blockholders in bear raids. Journal Financial Economics, Vol. 106, No. 2, pp. 229-246.
Kesner, I.F. & Johnson, R.B. (1990). An investigation of the relationship between board com- position and stockholders suits. Strategic Management Journal, Vol. 11, No. 4, pp. 327-336.
Karagul, Arman and Yonet, NazliKepce. (2009). Impact of Board Characteristics and Own- ership Structure on Voluntary Disclosure: Evidence from Turkey. Retrieved from www.academ ia.edu . on 3 November 2014.
Kim,O.,&Verrecchia,R.E. (1994). Market liquidity and volume around earnings announce- ments. Journal of Accounting and Economics, vol. 17, no. 1, pp. 41-67.
La Porta, R., Lopez-de-Silanes, F. & Shleifer, A. (1999). Corporate governance around the world. The Journal of Finance, Vol. 54, No. 2, pp. 471-517.
Lanfronconi, C.P, and Robertson, D.A. (2002). Corporate Financial reporting: The Role of the Board of Directors. Ivey Business Journal, vol. 67, no. 1, pp. 1-3.
Legenzova,R.(2008). An Assessment of Interaction between Ownership Structure and Vol- untary Financial Disclosure of Lithuanian Corporation. Economics and Management, pp. 48-55. Leung, S. & Horwitz, B. (2004). Director ownership and voluntary segment disclosure: Hong Kong evidence. Journal of International Financial Management & Accounting, Vol. 15, No. 3, pp.
235-260.
Mitton, T.(2002). A Cross Firm Analysis of The Impact of Corporate Governance on The East Asian Financial Crisis. Journal of Financial Economics, vol. 64, pp. 215-41.
Pagano, M. & Roell, A. (1998). The choice of stock ownership structure: agency costs, mon- itoring and the decision to go public. Quantitative Journal Economics, Vol. 113, No. 1, pp. 187- 225.
Peng, MW, Wang, DYL & Jiang, Y (2008). An institution-based View of International Busi- ness Strategy: A Focus on Emerging Economies. Journal of International Business Studies, vol. 39, no. 5, pp. 920-36.
Rindova, V.P. (1999). What corporate boards have to do with strategy: a cognitive perspec- tive. Journal of Management Studies , Vol. 36, No. 7, pp. 953-975.
Rouf, M. A., & Al Harun, M. A. (2011).Ownership structure and voluntary disclosure in annual reports of Bangladesh.Pak. Journal of Commercial Social Science, vol. 5, no. 1, pp. 129- 139.
Samaha, K., Khlif, H. & Hussainey, K. (2015). The impact of board and audit commite char- acteristic on voluntary disclosure: a-meta analysis. Journal of International Accounting, Auditing and Taxation, Vol. 24, pp. 13-28.
Sharma, V.D. (2004). Board of director characteristic, institutional ownership and fraud: evidence from Australia. Auditing: A Journal of Practice and Theory, Vol. 23, No. 2, pp. 105-117.
Thomsen, S, Pedersen, T & Kvist, HK (2006). Blockholder Ownership: Effect on Firm Value in Market and Control Based Governance System. Journal of Corporate Finance, vol. 12, pp. 246-69.
Wang, K, Sewon, O, M, Cathy C. (2008). Determinants and consequences of voluntary dis- closure in a emerging market: Evidence from China. Journal of International Accounting, Audit- ing and Taxation, vol. 17, pp. 14-30.
Yang, H. I. (2012). Capital market consequences of managers’ voluntary disclosure styles.
Journal of Accounting and Economics, vol. 53, no. 1, pp. 167-184.
Yunos, R.M., Zubaidah, I. & Malcolm, S. (2011). Ethnicity and Conservative Accounting: Malaysian Evidence. Asia Review of Accounting, vol. 20, no. 1, pp. 34-57.
Xiao, J.Z., He, Y. & Chow, C.W. (2004). The Determinant and characteristics of voluntary internet-based disclosure by listed Chinese companies. Journal of Accounting and Public Policy, Vol. 23, pp. 191-225.