An Examination of Voluntary Disclosure, Independent Board, Independent Audit Committee and Institutional Ownership
DOI:
https://doi.org/10.52962/ipjaf.2019.3.2.68Keywords:
Voluntary disclosure, board, audit committee, institutional ownership, firm sizeAbstract
This study examined the interaction effect of firm size on the impact of the independent board, independent audit committee, institutional ownership and voluntary disclosure. The study also explored the direct impact on the association between firm size, independent board, independent audit committee, institutional ownership and voluntary disclosure. Data collected from the annual report of banking companies listed on the Indonesia Stock Exchange throughout the year of an observational study. Hypotheses developed are tested with the partial least square – structural equation modelling (PLS-SEM) methodology, and the results subsequently interpreted. The results of the study revealed a positive and significant relationship between the independent board, independent audit committee, institutional ownership and firm size on voluntary disclosure in the Indonesia Stock Exchange listed banking companies. It also found that firm size, as a moderating variable, affects institutional ownership on voluntary disclosure. The existence of an independent audit committee aims at increasing the rate of voluntary disclosure in companies. Similarly, the impact of institutional ownership on voluntary disclosure has a consequence on management performance and commitment to enhance complete disclosure of information to the general public and users of financial statements for informed decision making in large companies.
Downloads
References
Aboagye, O. F., Bedi, I., & Kwakye, T. O. (2012). Corporate governance and disclosure practice of Ghanaian listed companies, Journal of Accounting in Emerging Economies, 2(2), 140-161.
Adhikary, B. K., & Mitra, R. K. (2016). Determinants of audit committee independence in the financial sector of Bangladesh. Applied Finance and Accounting, 2(2), 46-56.
Akhtaruddin, M., & Haron, H. (2010). Board ownership, audit committees' effectiveness, and corporate voluntary disclosures. Asian Review of Accounting, 18(3), 245-259.
Allegrini, M., & Grecco, G. (2013). Corporate boards, audit committees and voluntary disclosure: evidence from Italian listed companies. Journal Management Governance, 17, 187–216.
Alfraih, M. M., & Almutawa, A. M. (2017). Voluntary disclosure and corporate governance: empirical evidence from Kuwait. International Journal of Law and Management, 59(2), 217-236.
Al-Harun, M. A., & Rouf, M. A. (2011). Ownership structure and voluntary disclosure in annual reports of Bangladesh. Pak. J. Commer. Soc. Sci, 5(1), 129-139.
Al-Janadi, Y., Rahman, R. A., & Omar, N. H. (2013). Corporate governance mechanism and voluntary disclosure in Saudi Arabia. Research Journal of Finance and Accounting, 4(4), 25-36.
Arouri, H., Hossain, M., & Muttakin, M. B. (2014). Effects of the board and Ownership structure on corporate performance: Evidence from GCC countries. Journal of Accounting in Emerging Economies, 4(1), 117‐130.
Asian Development Bank. (2000). Corporate governance and finance in East Asia, 1st Vol. Asian Development Bank, Manilla.
Audra, B., & White, J., (2015). The effect of institutional ownership on firm transparency and information production. Journal of Financial Economics, 117(3), 508-533.
Azzam, I., (2010). The impact of institutional ownership and dividend policy on stock returns and volatility: evidence from Egypt. International Journal of Business, 15(4), 443-458.
Beattie, V., & Thomson, S. J. (2007). Lifting the lid on the use of content analysis to investigate intellectual capital disclosure. Accounting Forum, 31, 129-163.
Bedard, J., & Gendron, Y. (2010). Strengthening the financial reporting system: can audit committees deliver? International Journal of Auditing, 14(2), 174-210.
Belkaoui, A. R. (2004). Accounting Theory. 5th edition. Thomson Learning.
Bhasin, M. L., Makarov, R. R., & Orazalin, N. S. (2012). Determinants of voluntary disclosure in the banking sector: An empirical study. International Journal of Contemporary Business Studies, 3(3), 245-259.
Botosan, C. A. (1997). Disclosure level and the cost of equity capital. The Accounting Review, 72(3), 323-349.
Braiotta, L., Gazzaway, R. T., Colson, R., & Ramamoorti, S. (2010). The Audit Committee Handbook. Canada: John Wiley & Sons, Inc.
Chakroun, R. (2013). Family control, the board of directors’ independence and extent of voluntary disclosure in the annual reports: the case of Tunisian companies. Journal of Business Studies Quarterly, 5(1), 22-42.
Chakroun, R. & Matoussi, H., (2012). Determinants of the extent of voluntary disclosure in the annual reports of the Tunisian firms. Accounting and Management Information Systems, 11(3), 335-370.
Cornett, M. M., Marcus, A. J., Saunders, A. S., & Tehranian, H. T. (2006). Earning management, corporate governance, and true financial performance. Available at SSRN: https://ssrn.com/abstract=886142, [9 March 2018].
Crane, A. D., Michenaud, S., & Weston, J. P. (2016). The effect of institutional ownership on payout policy: evidence from index thresholds. The Review of Financial Studies, 29(6), 1377-1408.
Darmadi, S. (2013). Corporate Governance Disclosure in The Annual Report: An Exploratory Study on Indonesian Islamic banks. Humanomics, 29(1), 4-23.
Dulacha, G. B. (2007). Determinants of voluntary disclosure in Kenyan Companies annual reports. African Journal of Business Management, 1(5), 113-128.
Fama, E. F., & Jensen, M. C. (1983). Separation of ownership and control. Journal of Law and Economics, 26(2), 301-325.
Forum for Corporate Governance in Indonesia (2000). The Corporate Governance Series.
Gantyowati, E. & Nugraheni, R. L. (2014). The impact of financial distress status and corporate governance structures on the level of voluntary disclosure within annual reports of firms. (Case study non-financial firms in Indonesia over the period 2009-2011). Journal of Modern Accounting and Auditing, 10(4), 389-403.
Gregory, M.F., Bosch, F.A.J.V., & Henk, V. (2004). The importance of disclosure in corporate governance self-regulation across Europe: a review of the winter report and the EU action plan. International Journal of Disclosure and Governance, 1(2), 146-159.
Habbash, M., Hussainey, K., & Awad, A. E. (2016). The determinants of voluntary disclosure in Saudi Arabia: an empirical study. International Journal of Auditing and Performance Evaluation, 12(3), 13-236.
Hendriksen, E. S. & Breda, M. F. V. (2001). Accounting Theory, 5th Ed. Boston: Southern Methodist University.
Hossain, M., & Reaz, M. (2007). The determinants and characteristics of voluntary disclosure by Indian banking companies. Corporate Social Responsibility and Environmental Management, 14(5), 274-288.
Huang, C. J. (2010). Board, ownership and performance of banks with a dual board system: evidence from Taiwan. Journal of Management and Organization, 16(2), 219-234
IFCASI (2014). International Financial Corporation Advisory Service in Indonesia. The Indonesia corporate governance manual. Jakarta: OJK dan IFC.
Indonesia Financial Services Authority. (2014). Financial Services Authority Regulation No. 33/POJK.04/2014. Concerning Directors and Commissioners of Public Companies. Jakarta: Financial Services Authority.
Indonesia Financial Services Authority. (2015). Financial Services Authority Regulation. No. 55/POJK.04/2015. Concernings establishment and guidelines for audit committee work. jakarta: financial services authority.
Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: managerial behaviour, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305-360.
Jiang, H., Habib, A., & Hu, B. (2011). Ownership concentration, voluntary disclosures and information asymmetry in New Zealand. The British Accounting Review, 43(1), 39-53.
Kangarlouei, S. J., Birjandi, H. A., & Motavassel, M. (2013). The effect of ownership structure on voluntary disclosure in Tehran Stock Exchange. International Journal of Business Analytics and Intelligence, 1(1), 22-31.
Karim, K. E., Pinsker, R., & Robin, A. (2013). Firm size and the voluntary disclosure of nonfinancial information by private versus public firm managers. Managerial Auditing Journal, 28(9), 866-892.
Kaya, D. (2014). The influence of firm-specific characteristics on the extent of voluntary disclosure in XBRL: Empirical analysis of SEC filings. International Journal of Accounting and Information Management, 22(1), 2-17.
Li, J., Mangena, M., & Pike, R. (2012). The effect of audit committee characteristics on intellectual capital disclosure. The British Accounting Review, 44(2), 98-110.
Lundholm, R., & Winkle, M. V. (2006). Motives for the disclosure and non-disclosure: A framework and review of the evidence. Accounting and Business Research, 36, 43-48.
Madi, H. K., Ishak, Z., & Manaf, N. A. (2014). The impact of audit committee characteristics on corporate voluntary disclosure. International Conference on Accounting Studies. ICAS 2014.
Mokhtari, Z., & Makerani, K. F. (2013). Relationship of institutional ownership with firm value and earning quality: Evidence from Tehran Stock Exchange. International Journal of Economy. 2(7), 495-502.
Monks, R. A. G., & Minow, N. (2011) Corporate Governance 5th edition. United Kingdom: John Wiley & Son Ltd.
Nandi, S., & Ghosh, S. (2012). Corporate governance attributes, firm characteristics and the level of corporate disclosure: Evidence from the Indian listed firms. Decision Science Letters, 2(1), 45-58.
Rouf, A. (2011). Corporate characteristics, governance attributes and the extent of voluntary disclosure in Bangladesh. African Journal of Business Management, 5(19), 7836-7845.
Sanjaya, I.P.S., & Young, L. (2012). Voluntary disclosure and earnings management at bank companies listed in Indonesia Stock Exchange. China-USA Business Review, 11(3), 368-374.
Scaltrito, D. (2016). Voluntary disclosure in Italy: firm-specific determinants an empirical analysis of Italian listed companies. EuroMed Journal of Business, 11(2), 272-303.
Sihombing, J., & Pangaribuan, H. (2017). A study of corporate governance structure, disclosure and information asymmetry in indonesia banking industry. Jurnal Akuntansi, 21(2), 156-169.
Solomon, J. (2010). Corporate governance and accountability. 3rd edition. United Kingdom: John Wiley & Son Ltd.
Utama, A. A. (2012). Company disclosure in Indonesia: Corporate governance practice, ownership structure, competition and total assets. Asian Journal of Business and Accounting, 5(1), 75-108.
Uyar, A., Kilic, M., & Bayyurt, N. (2013). Association between firm characteristics and corporate voluntary disclosure: Evidence from Turkish listed companies. Intangible Capital, 9(4), 1080-1112.
Watson, A., Shrives, P., & Marston, C. (2002). Voluntary disclosure of accounting ratios in the UK. British Accounting Review, 34, 289-313.
Wijantini. (2006). Voluntary disclosure in the annual reports of financially distressed companies in Indonesia. Gadjah Mada International Journal of Business, 8(3), 343–365.
Downloads
Published
Issue
Section
License
Copyright (c) 2019 Indian-Pacific Journal of Accounting and Finance
This work is licensed under a Creative Commons Attribution 4.0 International License.
Site users
Copyright of all articles published in the Indian Pacific Journal of Accounting and Finance (IPJAF) belongs to their respective authors. Site users are permitted to download and print the articles for personal use. Further reproduction and/or distribution is not permitted, except for brief excerpts or quotations intended for inclusion in some other original works. In this case, proper attribution must be made to the author/copyright holder, and the place of publication must be acknowledged. Altering, editing or otherwise modifying the content of information obtained from the Indian Pacific Journal of Accounting and Finance (IPJAF) is a breach of copyright.
Authors
While you retain the copyright of your original material, by publishing in the Indian Pacific Journal of Accounting and Finance (IPJAF) , you will have agreed to the following contractual terms:
- The article is the original work of the stated author(s).
- The work has not been published previously.
- If the Article contains copyright material owned by others, written permission has been obtained from the copyright owner(s) to republish such material in any print or electronic medium and that you have included appropriate acknowledgement of such rights in the Article.
- The author agrees to grant a non-exclusive license to the Indian Pacific Journal of Accounting and Finance (IPJAF) to communicate the work to the public.
- The Indian Pacific Journal of Accounting and Finance (IPJAF) may use the article for publicity purposes.
- The Indian Pacific Journal of Accounting and Finance (IPJAF) may publish the article on third-party sites.
- Any subsequent publication of the article by the authors will carry the acknowledgement: First published in the Indian Pacific Journal of Accounting and Finance (IPJAF) [http://ipjaf.omjpalpha.com]
Disclaimer
The Indian Pacific Journal of Accounting and Finance (IPJAF) has taken all reasonable measures to ensure that material contained in this website is the original work of the author(s). However, the Journal gives no warranty and accepts no responsibility for the accuracy or the completeness of the material; no reliance should be made by any user on the material. The user should check with the authors for confirmation.
Articles published in the Indian Pacific Journal of Accounting and Finance (IPJAF) do not represent the views held by the editors and members of the editorial board. Authors are responsible for all aspects of their articles except the editorial screen design.
