Effect of Corporate Governance Rules on Voluntary Disclosure in Jordanian Corporations (An Empirical Study)

  • Munther AL-NIMER Accounting Department, Faculty of Economics and Administrative Sciences, Hashemite University Jordan, Jordan

Abstract

This paper aims to examine the impact of corporate governance (CG) rules using several variables—size of the board of directors, size of the audit committee, family ownership ratio, and their impact on the level of the voluntary disclosure of companies listed with Amman Stock Exchange (ASE). The study was conducted based on the annual reports of the first market that include 55 firms. Content analysis was applied to collect the required data from several sectors (financial, insurance, services, and industrial sectors) from 2016 to 2017.The results indicate a negative association among family ownership ratio, size of the audit committee, and voluntary disclosure level. However, the study shows that the size of the board of directors has a significant positive relationship with the level of voluntary disclosure. Furthermore, the results show that CG rules (size of the board of directors, size of the audit committee, and family ownership ratio) have a significant positive relationship with the voluntary disclosure level of the companies listed with ASE. In the borderline market environment, the study contributes to a theoretical understanding of the corporate governance of voluntary disclosure and the relationship between corporate governance mechanisms and voluntary disclosure. The outcomes provide empirical support for the theoretical notion that effective corporate governance plays an important role in increasing the extent of voluntary disclosure.

References

[1] Abdullah, W.A.W., Percy, M., Stewart, J. 2015. Journal of Contemporary Accounting & Economics, Volume 11, Issue 3, December 2015: 262-279.
[2] Akhtaruddin, M., Haron, H. 2010. Board ownership, audit committees’ effectiveness, and corporate voluntary disclosures. Asian Review of Accounting, Vol. 18 Issue: 3: 245-259, https://doi.org/10.1108/13217341011089649.
[3] Al Mamun, S.A., Kamardin, H. 2014. Corporate Voluntary Disclosure Practices of Banks in Bangladesh. Procedia - Social and Behavioral Sciences, Volume 164, 31 December 2014: 258-263.
[4] Alfraih, M.M., Almutawa, A.M. 2017. Voluntary disclosure and corporate governance: empirical evidence from Kuwait. International Journal of Law and Management, Vol. 59 Issue: 2: 217-236, https://doi.org/10.1108/IJLMA-10-2015-0052.
[5] Alhazaimeh, A., Palaniappan, R., Almsafir, M. 2014. The Impact of Corporate Governance and Ownership Structure on Voluntary Disclosure in Annual Reports among Listed Jordanian Companies. Procedia - Social and Behavioral Sciences, Volume 129, 2014: 341-348, ISSN 1877-0428, http://dx.doi.org/10.1016/j.sbspro.2014.03.686.
[6] Al-Nasser, A., Abdallah, Ismail, A.K. 2017. CG practices, ownership structure, and corporate performance in the GCC countries. Journal of International Financial Markets, Institutions and Money, Volume 46, January 2017: 98-115.
[7] Ararat, M., Black, B.S., BurcinYurtoglu B. 2017. The effect of Corporate Governance on firm value and profitability: Time-series evidence from Turkey. Emerging Markets Review, Volume 30:113-132.
[8] Babío Arcay, M.R., Muiño, Vázquez, M.F. 2005. Corporate Characteristics, Governance Rules and the Extent of Voluntary Disclosure in Spain. Advances in Accounting, Volume 21, 2005: 299-331.
[9] Briano-Turrent, G.del C., Rodríguez-Ariza L. 2016. Corporate Governance ratings on listed companies: An institutional perspective in Latin America. European Journal of Management and Business Economics, Volume 25, Issue 2, 8 May 2016: 63-75.
[10] Cabeza-García, L., Sacristán-Navarro, M., Gómez-Ansón, S. 2017. Family involvement and corporate social responsibility disclosure. Journal of Family Business Strategy, Vol. 8, Issue 2: 109-122.
[11] Cong, Yu, Freedman, M. 2011. Corporate Governance and environmental performance and disclosures. Advances in Accounting, Volume 27, Issue 2: 223-232, ISSN 0882-6110, http://dx.doi.org/10.1016/j.adiac.2011.05.005.
[12] Dai, L., Fu, R., Jun-Koo Kang, Lee, I. 2016. Corporate Governance and the profitability of insider trading. Journal of Corporate Finance, Volume 40, October 2016: 235-253.
[13] Dembo, A.M., Rasaratnam, S. 2014. Corporate Governance and Disclosure in Nigeria: An Empirical Study, Procedia - Social and Behavioral Sciences, Volume 164, 31 December 2014: 161-171.
[14] Elmagrhi, M.H., Ntim, C.G., Yan, Wang. 2016. Antecedents of voluntary Corporate Governance disclosure: a post-2007/08 financial crisis evidence from the influential UK Combined Code. Corporate Governance, Vol. 16 Issue: 3: 507-538, https://doi.org/10.1108/CG-01-2016-0006.
[15] Giannarakis, G. Corporate Governance and financial characteristic effects on the extent of corporate social responsibility disclosure. Social Responsibility Journal, Vol. 10 Issue: 4: 569-590, https://doi.org/10.1108/SRJ-02-2013-0008.
[16] Gisbert, A., Navallas, B. 2013. The association between voluntary disclosure and Corporate Governance in the presence of severe agency conflict. Advances in Accounting, Volume 29, Issue 2, 2013: 286-298, ISSN 0882-6110, http://dx.doi.org/10.1016/j.adiac.2013.07.001.
[17] Habbash, M. 2016. Corporate Governance and corporate social responsibility disclosure: evidence from Saudi Arabia. Social Responsibility Journal, Vol. 12 Issue: 4: 740-754, https://doi.org/10.1108/SRJ-07-2015-0088.
[18] Ho, S.S.M., Kar, Shun, Wong. 2001. A study of the relationship between Corporate Governance structures and the extent of voluntary disclosure. Journal of International Accounting, Auditing and Taxation, Volume 10, Issue 2, Summer 2001: 139-156.
[19] Hodgdon, C., Hughes, S.B. 2016. The effect of corporate governance, auditor choice and global activities on EU company disclosures of estimates and judgments. Journal of International Accounting, Auditing and Taxation, Volume 26, 2016: 28-46.
[20] Huafang, X., Jianguo, Y. 2007. Ownership structure, board composition and corporate voluntary disclosure: Evidence from listed companies in China. Managerial Auditing Journal, Vol. 22 Issue: 6:604-619, https://doi.org/10.1108/02686900710759406.
[21] Ji, Xu-dong, Lu, Wei, Qu, Wen. 2015. Determinants and economic consequences of voluntary disclosure of internal control weaknesses in China. Journal of Contemporary Accounting & Economics, Volume 11, Issue 1, April 2015: 1-17.
[22] Lakhal, F. 2005. Voluntary Earnings Disclosures and Corporate Governance: Evidence from France. Review of Accounting and Finance, Vol. 4 Issue: 3: 64-85, https://doi.org/10.1108/eb043431.
[23] Liu, X., Zhang, C. 2017. Corporate governance, social responsibility information disclosure, and enterprise value in China. Journal of Cleaner Production, Volume 142, Part 2, 20 Jan.2017: 1075-1084.
[24] Lone, E.J., Ali, A., Khan, I. 2016. Corporate Governance and corporate social responsibility disclosure: evidence from Pakistan, Corporate Governance. The International Journal of Business in Society, Vol. 16 Issue: 5: 785-797, https://doi.org/10.1108/CG-05-2016-0100.
[25] Ortas, E., et al. 2015. The impact of institutional and social context on corporate environmental, social and governance performance of companies committed to voluntary corporate social responsibility initiatives. Journal of Cleaner Production, Volume 108, Part A, 1 December 2015: 673-684.
[26] Othman, R., et al. 2014. Influence of Audit Committee Characteristics on Voluntary Ethics Disclosure. Procedia - Social and Behavioral Sciences, Volume 145, 25 August 2014: 330-342.
[27] Poh‐Ling, Ho, Taylor, G. 2013. Corporate Governance and different types of voluntary disclosure: Evidence from Malaysian listed firms. Pacific Accounting Review, Vol. 25 Issue: 1: 4-29, https://doi.org/10.1108/01140581311318940.
[28] Premuroso, R.F., Bhattacharya, S. 2008. Do early and voluntary filers of financial information in XBRL format signal superior Corporate Governance and operating performance? International Journal of Accounting Information Systems, Volume 9, Issue 1, March 2008: 1-20.
[29] Razali, W.A.A.W.M., Arsha, R. 2014. Disclosure of Corporate Governance Structure and the Likelihood of Fraudulent Financial Reporting. Procedia - Social and Behavioral Sciences, Volume 145: 243-253.
[30] Rose, C. 2016. Firm performance and comply or explain disclosure in corporate governance. European Management Journal, Volume 34, Issue 3, June 2016: 202-222.
[31] Samaha, K., Dahawy, K., Hussainey, K., Stapleton, P. 2012. The extent of Corporate Governance disclosure and its determinants in a developing market: The case of Egypt. Advances in Accounting, Volume 28, Issue 1, June 2012: 168-178.
[32] Schoenfeld, J. 2017. The effect of voluntary disclosure on stock liquidity: New evidence from index funds. Journal of Accounting and Economics, Volume 63, Issue 1, February 2017: 51-74.
[33] Yan Qiu, Shaukat, A., Tharyan, R. 2016. Environmental and social disclosures: Link with corporate financial performance. The British Accounting Review, Volume 48, Issue 1, March 2016: 102-116.
Published
2018-03-31
How to Cite
AL-NIMER, Munther. Effect of Corporate Governance Rules on Voluntary Disclosure in Jordanian Corporations (An Empirical Study). Journal of Advanced Research in Law and Economics, [S.l.], v. 9, n. 2, p. 365-375, mar. 2018. ISSN 2068-696X. Available at: <https://journals.aserspublishing.eu/jarle/article/view/2456>. Date accessed: 17 jan. 2022. doi: https://doi.org/10.14505//jarle.v9 2(32).01.