Corporate Governance, Companies’ Disclosure Practices, and Market Transparency: A Cross Country Study
Lancaster University - Department of Accounting and Finance
Philip R. Brown
University of Western Australia - Department of Accounting and Finance; University of New South Wales - Australian School of Business; Lancaster University - Department of Accounting and Finance; Financial Research Network (FIRN)
Lancaster University Management School
January 13, 2015
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 different levels of disclosure between common and code law countries, although 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 transparent share prices. This would suggest that, when the underlying economic conditions and the firm’s business model are consistent with reduced corporate transparency, corporate governance is strengthened to mitigate agency costs. We are thus led to the conclusion that even if information is disclosed more frequently by better-governed firms, it is not necessarily the case their shares are priced more efficiently.
Number of Pages in PDF File: 60
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: January 15, 2015
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