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The effect of national governance codes on firm disclosure practices : evidence from analyst earnings forecasts

Nowland, John (2008) The effect of national governance codes on firm disclosure practices : evidence from analyst earnings forecasts. Corporate Governance: An International Review, 16(6), pp. 475-491.

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Abstract

This study examines whether voluntary national governance codes have a significant effect on company disclosure practices. Two direct effects of the codes are expected: 1) an overall improvement in company disclosure practices, which is greater when the codes have a greater emphasis on disclosure; and 2) a leveling out of disclosure practices across companies (i.e., larger improvements in companies that were previously poorer disclosers) due to the codes new comply-or-explain requirements. The codes are also expected to have an indirect effect on disclosure practices through their effect on company governance practices. The results show that the introduction of the codes in eight East Asian countries has been associated with lower analyst forecast error and a leveling out of disclosure practices across companies. The codes are also found to have an indirect effect on company disclosure practices through their effect on board independence. This study shows that a regulatory approach to improving disclosure practices is not always necessary. Voluntary national governance codes are found to have both a significant direct effect and a significant indirect effect on company disclosure practices. In addition, the results indicate that analysts in Asia do react to changes in disclosure practices, so there is an incentive for small companies and family-owned companies to further improve their disclosure practices.

Impact and interest:

11 citations in Scopus
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7 citations in Web of Science®

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ID Code: 30786
Item Type: Journal Article
Keywords: corporate governance codes, board policy issues, transparency, Asia, financial disclosure, financial auditing issues, corporate governance
DOI: 10.1111/j.1467-8683.2008.00707.x
ISSN: 0964-8410
Subjects: Australian and New Zealand Standard Research Classification > COMMERCE MANAGEMENT TOURISM AND SERVICES (150000) > BANKING FINANCE AND INVESTMENT (150200) > Finance (150201)
Australian and New Zealand Standard Research Classification > LAW AND LEGAL STUDIES (180000) > LAW (180100)
Divisions: Current > QUT Faculties and Divisions > QUT Business School
Current > Schools > School of Economics & Finance
Deposited On: 12 Feb 2010 22:47
Last Modified: 29 Feb 2012 23:42

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