The Association between Voluntary Disclosure and Corporate Governance in the Presence of Severe Agency Conflicts

58 Pages Posted: 23 Oct 2014

See all articles by Ana Gisbert

Ana Gisbert

Universidad Autónoma de Madrid

Begoña Navallas

Universidad Autónoma de Madrid

Date Written: November 30, 2012

Abstract

Agency conflicts between investors are particularly severe in the presence of high family and block-holder ownership. By focusing on a setting characterised by high ownership concentration, we study the role of independent directors in promoting transparency through increased disclosure. In our tests, we use a sample of Spanish firms and, consistent with prior work, we show that the presence of these directors is strongly associated with increased voluntary disclosure. Additionally, we find that when an executive director takes on chair responsibilities the level of voluntary information is reduced, creating potential conflicts with the role of independent directors. We conclude that the regulatory environment can create sufficient incentives to bring together the interests of minority and majority shareholders and guarantee an efficient monitoring role of independent directors. However, results suggest that other mechanisms should be reinforced in order to improve the role of governance control on agency relationships, particularly in the case of the concentration of chair and executive responsibilities.

Keywords: Board composition, Independent directors, Agency conflicts, Ownership concentration, Voluntary disclosure

JEL Classification: M40, M41, G32, C33

Suggested Citation

Gisbert, Ana and Navallas, Begoña, The Association between Voluntary Disclosure and Corporate Governance in the Presence of Severe Agency Conflicts (November 30, 2012). Available at SSRN: https://ssrn.com/abstract=2513858 or http://dx.doi.org/10.2139/ssrn.2513858

Ana Gisbert (Contact Author)

Universidad Autónoma de Madrid ( email )

Avda. Francisco Tomás y Valiente, 5
Faculty of Economics
Madrid, Madrid 28049
Spain
0034 914976341 (Phone)

Begoña Navallas

Universidad Autónoma de Madrid ( email )

Campus Cantoblanco
C/Kelsen, 1
Madrid, Madrid 28049
Spain

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