Are All Outside Directors Created Equal With Respect to Firm Disclosure Policy?

Review of Quantitative Finance and Accounting 55, pages 541–577(2020) DOI:10.1007/s11156-019-00852-1

52 Pages Posted: 27 Jul 2020

See all articles by Luminita Enache

Luminita Enache

University of Calgary; Dartmouth College - Tuck School of Business

Anup Srivastava

University of Calgary - Haskayne School of Business

Antonio Parbonetti

University of Padua

Date Written: August 10, 2019

Abstract

Empirical evidence on the association between outside directors and firms’ voluntary disclosures is mixed and controversial. We hypothesize that the outside directors do not represent a homogeneous group of people as considered in the literature. Using hand-collected data from a sample of biotechnology firms, we find that the aforesaid association differs based on the directors’ professional backgrounds. Our results are consistent with two ideas. First, an outside director’s influence on firm disclosure policy is shaped by her professional background. Second, firms match outside directors’ professional backgrounds with their disclosure policy. We cannot distinguish between the two explanations. Yet, we make an important contribution to the literature. We show that the impact and the selection prospects of outside directors are not as uniform as previously considered in the literature. Thus, the researchers examining financial disclosures must take into account the background characteristics of all outside directors, not just of those in the audit committee. And investor bodies must consider the background characteristics of candidates in their recommendation for outside-director selection.

Keywords: Biotechnology firms, Corporate governance, Voluntary disclosures, Proprietary costs, Outside directors

JEL Classification: M40, M41, G14, G32, G34

Suggested Citation

Enache, Luminita and Srivastava, Anup and Parbonetti, Antonio, Are All Outside Directors Created Equal With Respect to Firm Disclosure Policy? (August 10, 2019). Review of Quantitative Finance and Accounting 55, pages 541–577(2020) DOI:10.1007/s11156-019-00852-1, Available at SSRN: https://ssrn.com/abstract=3640610

Luminita Enache (Contact Author)

University of Calgary ( email )

140 Scanlon Green NW
Calgary, Alberta T3L1N3
Canada
5874389015 (Phone)

HOME PAGE: http://haskayne.ucalgary.ca/haskayne_info/profiles/luminita-enache

Dartmouth College - Tuck School of Business ( email )

140 Scanlon Green NW
Calgary, Alberta T3L1N3
Canada
5874389015 (Phone)

HOME PAGE: http://haskayne.ucalgary.ca/haskayne_info/profiles/luminita-enache

Anup Srivastava

University of Calgary - Haskayne School of Business ( email )

2500 University Drive, NW
Calgary, Alberta T2N 1N4
Canada

Antonio Parbonetti

University of Padua ( email )

Via del Santo 33
Padova, 35123
Italy
+39 049 8274261 (Phone)

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