Corporate Governance, Companies’ Disclosure Practices, and Market Transparency: A Cross Country Study
Lancaster University - Department of Accounting and Finance
Philip R. Brown
UWA Business School, M250; Financial Research Network (FIRN)
Lancaster University Management School
December 17, 2015
Journal of Business Finance and Accounting, Forthcoming
We examine the link between corporate governance, companies’ disclosure practices and their equity market transparency in a study of more than 5,000 listed companies in 23 countries covering the period 1 January 2003 to 31 December 2008. Our results confirm the belief that better-governed firms make more frequent disclosures to the market. We also find greater disclosure in common law relative to code law countries. However firms with better governance in both code and common law countries make more frequent disclosures. We measure market transparency by the timeliness of prices. In contrast to single country studies, results show, for the 23 countries collectively, better corporate governance is associated with less timely share prices. This would suggest that a firm substitutes better corporate governance for transparency. We are thus led to the conclusion that even if information is disclosed more frequently by better-governed firms, it does not necessarily follow that information is reflected in share prices on a timelier basis.
Number of Pages in PDF File: 52
Keywords: Corporate Governance, Disclosure Practices, Market Transparency, Legal Origin, Timeliness of Price Discovery
JEL Classification: G30, G38, M40
Date posted: September 1, 2012 ; Last revised: December 18, 2015
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