Directors’ Informational Role in Corporate Voluntary Disclosure: An Analysis of Directors from Related Industries

49 Pages Posted: 28 Mar 2019 Last revised: 9 Jun 2019

See all articles by Ruihao Ke

Ruihao Ke

Southern Methodist University (SMU) - Accounting Department

Meng Li

University of Texas at Dallas - Naveen Jindal School of Management

Yuan Zhang

University of Texas at Dallas

Multiple version iconThere are 2 versions of this paper

Date Written: March 15, 2019

Abstract

Boards of directors play their role in corporate governance by advising and/or monitoring managers. In the corporate disclosure literature, prior research has documented directors’ monitoring role, yet empirical evidence on directors’ advising role is limited. Since the advising role often entails information transfer, we examine directors who concurrently serve as directors or executives in the firms’ related industries (DRIs) and hence possess valuable information about the firms’ external operating environment. We hypothesize and find that more DRIs on boards are associated with more accurate management forecasts. This association is stronger when firms face greater uncertainty, and holds in settings where DRIs are unlikely to monitor managers, suggesting a distinct advising role of DRIs. Our study highlights directors’ role as information suppliers and advisors who help shape corporate voluntary disclosure.

Keywords: Directors, Related Industries, External Information, Management Forecast Accuracy

JEL Classification: G34, M40

Suggested Citation

Ke, Ruihao and Li, Meng and Zhang, Yuan, Directors’ Informational Role in Corporate Voluntary Disclosure: An Analysis of Directors from Related Industries (March 15, 2019). Contemporary Accounting Research, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3353395 or http://dx.doi.org/10.2139/ssrn.3353395

Ruihao Ke

Southern Methodist University (SMU) - Accounting Department ( email )

United States
214-768-3702 (Phone)

Meng Li

University of Texas at Dallas - Naveen Jindal School of Management ( email )

800 W Campbell Road
Richardson, TX 75083-0688
United States
(972)883-2492 (Phone)

Yuan Zhang (Contact Author)

University of Texas at Dallas ( email )

P.O. Box 830688
Richardson, TX 75083-0688
United States

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