Association between Board Composition, Ownership Structure and Information Disclosure Level in the Annual Report

Abstract

To narrow the information gap between managers and investors, the authorities concerned in Taiwan have called for greater corporate disclosure transparency and treated it as an important principle in the reform of corporate governance. It is held that corporate disclosure, if determined by the responsiveness of corporate boards, plays a significant role in mitigating information asymmetry. In this study, we examine the impact of board composition and ownership structure on information disclosure level in the annual report. The empirical results show that the more independent and smaller the board is, the higher the disclosure scores of corporate information are. In like manner, the higher the managerial ownership is, the higher the scores are. Following the percentile rank method, this study also finds that as the aggregate score of corporate governance mechanisms becomes higher, the level of corporate disclosure becomes better. Meanwhile, the differences that resulted from the impacts of corporate governance mechanisms on corporate disclosure types reveal the monitoring functions of the institutional investors. The results are robust, no matter whether the analysis is performed by filtering out corporate governance factors comprised in corporate disclosure or performed through some other sensitivity tests.