Canadian Institute of Chartered Accountants (CICA), (2002): Management`s discussion and analysis: ... in Irelandâ, Corporate Governance, 16, 5, pp 416-429.
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BOARD OF DIRECTORS’ CHARACTERISTICS AND FORWARD-LOOKING INFORMATION DISCLOSURE STRATEGIES
María Cristina Abad Navarro Titular de Escuela Universitaria Departamento de Contabilidad y Economía Financiera Universidad de Sevilla Francisco Bravo Urquiza Profesor Ayudante Doctor Departamento de Contabilidad y Economía Financiera Universidad de Sevilla
Área temática: a) Información financiera y normalización contable. Palabras clave: Gobierno Corporativo, Consejo de Administración, Divulgación de Información, Información Previsional.
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BOARD OF DIRECTORS’ CHARACTERISTICS AND FORWARD-LOOKING INFORMATION DISCLOSURE STRATEGIES.
Abstract
This paper studies the effect of the characteristics of the board of directors on the disclosure of forward-looking information, considering different measures of forwardlooking information. Results show that more independent boards of directors influence positively on the quality of forward-looking information. Independent directors are aware of the need to increase the quality of this kind of information, what would help to improve analysts’ forecasts and hence, market transparency. This evidence will have direct economic implications on both shareholders and regulators, who might influence forwardlooking disclosure strategies by managing the composition of the board of directors.
Resumen
Este trabajo estudia el efecto de determinadas características del consejo de administración sobre la divulgación de información previsional, considerando diferentes medidas de esta información. Los resultados muestran que los consejos más independientes influyen positivamente en la calidad de la información previsional. Los consejeros independientes son más conscientes de la necesidad de incrementar la calidad de esta información, lo que mejoraría los pronósticos de los analistas y la transparencia informativa. Esta evidencia tiene implicaciones directas en accionistas y reguladores, que podrían influir en las estrategias de divulgación de información previsional gestionando la composición de los consejos de administración.
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1. Introduction The role of disclosure in capital markets is crucial. Information and incentive problems impede the efficient allocation of resources in a capital market economy (Healy and Palepu, 2001). Agency theory predicts that conflicts are expected to arise when there is incomplete and asymmetric information between principal and agent in a company, as they have conflicting interest (Jensen and Meckling, 1976). A potential solution to the information asymmetries and agency problems is regulation on information disclosure. Corporate governance mechanisms might also help to reduce these problems, by monitoring and disciplining management on behalf of external owners. Voluntary disclosure and corporate governance are considered as complementary mechanisms to mitigate agency problems, with increased disclosure because of the adoption of more governance controls (Baek et al., 2009; Cerbioni and Parbonetti, 2007).
Recently, studies about the effect of corporate governance mechanisms on voluntary disclosure have proliferated, although empirical evidence is inconclusive. However, as far as we are concerned, no prior study has investigated the link between corporate governance and disclosure of forward-looking information. Corporate governance mechanisms are established to protect investors and assure maximization of firm value. The stock market ability to estimate firm value will be higher when firms provide forwardlooking information disclosures. As historical information is insufficient for appropriate decision making, disclosure of forward-looking information would reduce information risk, improving future cash-flows, earnings estimation and investment decisions (Kieso and Weygant, 1986; Hussainey et al 2003; Hussainey and Walker, 2009). Moreover, a number of reports have pointed out the usefulness of forward-looking financial information for investors (AICPA, 1973; ICAEW, 1975; FASB, 2001; ICAEW, 2002; CICA, 2002).
The purpose of this paper is to investigate the influence of corporate governance mechanisms on forward-looking information disclosure in annual reports. Our paper extends prior research on corporate governance and voluntary disclosure by specifically focusing on forward-looking information. The analysis of forward-looking information is broken down into partial information categories. Some information categories are more useful for investors to predict earnings forecasts and could be more valuable in capital markets. Financially verifiable forward-looking is considered as more value relevant in capital markets (Bozzolan et al., 2009). Financially verifiable forward-looking information is defined as quantified and financial, which makes relevant to examine the influence of corporate governance on this kind of information. The analysis of the relationships between corporate governance and forward-looking information disclosure would help regulators and managers to set up corporate governance mechanisms which will
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contribute to improve the functioning of capital markets by improving disclosure of forwardlooking information.
Content analysis techniques are used to analyse forward-looking information disclosed in annual reports of service companies in the S&P 100 Index. Disclosure strategies are determined by the consideration of diverse information attributes: information quantity, information coverage, and distribution of information among different categories. As a result, different measures of forward-looking information are included as dependent variables in the empirical analysis that examines the relationship between board characteristics and forward-looking disclosure strategies.
Results indicate that board size influences positively on the quantity of forward-looking information published in annual reports, but not on information quality. However, more independent boards of directors influence positively on the quality of forward-looking information. This evidence seems to suggest that independent directors are aware of the need of increase the quality of this kind of information, to improve analysts’ forecasts and hence, market transparency.
Our study contributes to the literature on the connections between corporate governance and disclosure by showing that forward-looking information disclosure strategies are influenced by board of directors’ characteristics. This evidence will have direct economic implications on both shareholders and regulators, who might influence forward-looking information disclosure strategies by managing the composition of the board of directors.
The paper is organized as follows. The literature regarding corporate governance and disclosure is reviewed in the next section. Section 3 describes data collection, the sample, and explains the research method. Section 4 discusses the results of the empirical analysis and Section 5 summarizes the contributions of the paper. 2. Previous literature and hypotheses development Empirical evidence about the effect of corporate governance on disclosure fails to provide conclusive results (Donnelly and Mulcahy, 2008). Since corporate governance plays an important role in reducing information asymmetries, this topic has received a great emphasis in academic research. The interactions among the audit committee, external and internal auditors, and the board of directors are crucial to improve quality of financial reporting (Cohen et al., 2004). Several corporate governance mechanisms have been examined in previous studies, with the goal of determining the effect of these mechanisms on the information disclosed by firms.
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The board of directors manages information disclosure in annual reports and therefore constituents of boards may be important (Li et al, 2008). In particular, the board of directors is regarded as a relevant mechanism in the oversight of managerial actions (Fama and Jensen, 1983). Researchers have examined the role played by certain characteristics of the board of directors in improving the disclosure quality. Board size and board composition are expected to influence disclosure strategies.
The purpose of our work is to examine the influence of some particular characteristics of the board of directors on forward-looking disclosure strategies. Theoretical arguments try to explain the influence of board characteristics on voluntary disclosure, and they led us to formulate the hypotheses below:
Board size The size of the board of directors could influence on the information disclosed by firms. An excessive number of directors might influence negatively on decision making, and the costs derived from larger boards could overweigh the benefits (Lipton y Lorsh, 1992). According to Jensen (1993), when groups increase in size coordination problems make them less effective. Furthermore, larger boards are expected to monitor top managers less effectively (Yermack, 1996). Under the framework suggested by agency theory, we consider that larger boards control company activities less efficiently, this avoiding an improvement in the quality of disclosure of voluntary information. Some studies find a negative relationship between the board size and voluntary disclosure (Cerbioni and Parbonetti, 2007), and others do not find any relationship between these variables (Cheng and Courtenay, 2006).
We measure board size by the number of corporate directors and assume that board size does not influence positively the quality of the disclosure of forward-looking information:
H1: There is no positive association between board size and the quality of forward-looking disclosure.
Board composition A higher proportion of non-executive directors might influence positively on the disclosure level (Haniffa and Cooke, 2005). Nevertheless, empirical results are mixed. Extant evidence indicates that voluntary disclosure increases with the number/proportion of nonexecutive/independent directors on the board (Chen and Jaggi, 2000; Babío Arcay and Muiño Vázquez, 2005; Cheng and Courtenay, 2006; Lim et al., 2007; Donnelly and
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Mulcahy, 2008). However, there is also evidence of no significant positive relationship between the proportion of independent directors on the board and the extent of voluntary disclosure (Ho and Wong, 2001; Haniffa and Cooke, 2002) and even of an increase in nonexecutive directors reducing voluntary disclosure (Eng and Mak, 2003; Barako et al. 2006).
Independent directors may provide advices about strategic decisions, and improve monitoring of decisions and managers activities, this reducing opportunism (Leftwich, Watts and Zimmerman, 1981; Fama and Jensen, 1983; Chen and Jaggi, 2000; Haniffa and Cooke, 2002). Independent directors may be elected by blockholders to represent their interests and may be able to acquire information directly, rather than through public disclosure. Outside directors may also act as a substitute for monitoring through public disclosure (Eng and Mak, 2003). However, an insufficient knowledge of business is pointed out as an inconvenient to be considered when the number of independent director is excessive, since it would reduce board effectiveness (Patton and Baker, 1987).
The proportion of independent directors in the board is considered as a measure of board composition, and we hypothesize:
H2: There is an association between board composition and the quality of forward-looking information disclosure.
CEO duality Board independence can be examined by considering role duality, occurring when the same person undertakes both the roles of chief executive officer and chairman (Li et al, 2008). The person who occupies both roles would tend to withhold unfavourable information to outsiders (Ho y Wong, 2001). Hence, separation of both roles should positively influence disclosure quality. Previous studies documented inconclusive results about the relationship between voluntary disclosure when the chief executive officer role. Some studies indicate that voluntary disclosure decreases with CEO duality (Gul and Leung, 2004), but others advocate the absence of a relationship between CEO duality and voluntary disclosure (Ho and Wong, 2001; Haniffa and Cooke, 2002; Barako et al. 2006; Cheng and Courtenay, 2006).
A dummy variable is used to capture CEO duality, with the value of 0 if the same person plays both roles and 1 otherwise. Our next hypothesis is as follows:
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H3: There is an association between CEO duality and quality of forward-looking information disclosure. 3. Sample and method
Forward-looking information disclosed by service companies (US-SIC codes 5, 6, 8 and 9) included in the Standard & Poor’s 100 Index is measured. This provided us with a population of 42 companies. One single industry is selected in order to obtain more reliable results. Different industries display different patterns of disclosure (Botosan, 1997), and this could affect the results obtained. Services companies have recently been involved in financial scandals (Adelphia, Global Crossing, Meryll Lynch, Worldcom). Two companies were dropped from the sample because there were insufficient available data. The final sample was composed of 40 firms. The number of observations provides a good reliability to draw relevant conclusions. Some prior empirical studies on disclosure using linear regression selected a similar sample size (Cooke, 1992; Jaggi and Low, 2000; Alsaeed, 2005).
Annual reports of financial year 2007 were downloaded directly from companies’ websites. Information about board characteristics was obtained manually, by reading both annual reports and proxy statements. Some control variables were included in the analysis. Data about control variables were mainly extracted from the Osiris database, and alternatively, from companies’ annual reports.
Content analysis techniques are used to analyse forward-looking information disclosed in annual reports. Each annual report is individually coded, searching for every piece containing forward-looking information, in order to determine forward-looking information strategies lead by companies. Disclosure strategies are determined by the consideration of diverse information attributes: information quantity, information coverage, and distribution of information among different categories. As a result, different measures of forwardlooking information are included as dependent variables in the statistical analysis. It is important in this kind of studies that companies display a sufficient amount of variation in disclosure practices (Bosotan, 1997). Our sample provides a broad range of variation in every information measure, what enables us to analyse companies with different disclosure strategies.
In order to obtain the value of dependent variables, we design a self-constructed index, which organises forward-looking information in six categories: 1)
Activity
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2)
strategy
3)
environment
4)
financial
5)
corporate governance
6)
intellectual capital information
The first three categories are included following the suggestions from professional organisms (AICPA, 1994; CICA, 2001; FASB, 2001) and previous literature (Robb et al., 2001; Bozzolan et al., 2009). In addition, we include financial, corporate governance and intellectual capital information due to its relevance for decision making. These six information categories are divided in 26 items. Items were chosen based on previous literature (Botosan, 1997; Francis et. al, 2008; Bozzolan et al., 2009), and by reading annual reports. The list of items is shown in table 1. - Insert Table 1 around here -
The sentence is chosen as a recording unit because it is considered a more reliable unit of analysis than the number of pages or the number of paragraphs (Hackston and Milne, 1996). Content analysis is used to identify and classify sentences with forward-looking information in the information items. A Coverage Index (COV) is obtained, by dividing the number of items disclosed by a company into the total number of items that a company may disclose (26 items).
Other measures of information were also considered. A measure of quantity (QNT) was included in the analysis, taking into account only the number of sentences with forwardlooking information. Moreover, we employ several measures which consider the proportion of forward-looking information disclosed on each of the categories described in table 1. Hence, forward-looking disclosure strategies are determined by looking at different measures of forward-looking information: quantity (QNT), coverage (COV), information about activity (ACT), environment (ENV), financial (FIN), about organization and corporate governance (ORG) and intellectual capital (INT). Each of these measures is alternatively included in the statistical analysis to examine the effect of board characteristics on forward-looking disclosure strategies.
In order to analyse the relationship between board characteristics and forward-looking disclosure strategies, regression analysis is performed. Both univariate and multivariate analyses were carried out. On the basis of prior studies, we employ as a measure for board characteristics the variables described in the hypotheses development:
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•
Board size (BSIZE), measured by the number of directors in the board.
•
Board independence (BIND), measured by the percentage of independent directors in the board.
•
CEO duality (DUAL). A dummy variable is used, with a value of 0 is a person assumes both roles of Chief Executive Officer and Chairman of the board, and 1 otherwise.
Moreover, and on the basis of prior research on voluntary disclosure, two control variables were chosen: size (SIZE) and profitability (ROE). Prior evidence agrees on the existence of a positive relationship between size and voluntary disclosure (Firth, 1979; Cooke, 1989; Hossain et al., 1995; Prencipe, 2004). Moreover, managers have incentives to disclose voluntary information in companies with high profitability rates to improve their compensation arrangements (Giner, 1997), and to increase investor confidence (Singhvi and Desai, 1971).
Table 2 contains a summary of the variables employed in the analysis. The next model is examined to determine the effect of board characteristics on forward-looking information: IPi = α + ß1BSIZEi + ß2 BINDi + ß3 DUALi + ß4 SIZEi + ß5 ROEi + e where, IPi refers to forward-looking information disclosed by company i. Different measures are alternatively included in each model (quantity, coverage, activity, environment, strategy, financial, organizational and intellectual capital). BSIZEi is the size of the board of directors in company i. BINDi refers to the proportion of independent directors in the board in company i. DUALi reflects the independence of the CEO in company i. SIZEi is the size of company i, measured by total assets. ROEi is a measure of the profitability of company i, calculated by return on equity. - Insert Table 2 around here -
4. Results of empirical analysis Descriptive statistics are presented in table 3. Results show an important variability in the values of the measures of forward-looking information. A broad range of variation is obtained when measuring quantity and coverage of forward-looking information.
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Furthermore, forward-looking information disclosed about the six information categories indicates important differences across the companies that compose the sample. On average, companies release more forward-looking information about strategic and financial topics. Approximately 30% of forward-looking information published in annual reports deals with strategic and financial topics, although some firms do not disclosed this kind of information. However, in some cases, forward-looking information about strategy and financial forward-looking information reach 59% and 79% respectively over the total forward-looking information disclosed by companies.
- Insert Table 3 around here -
Independent variables also indicate a high variability. Board size ranges between 8 and 17 members; the minimum percentage of independent directors in the board is 64%, whereas the maximum value is close to 93%. These differences might lead to dissimilar forwardlooking disclosure strategies.
Table 4 shows Spearman coefficients for the variables included in the analysis. We fail to find any significant relationship among independent variables. A univariate analysis can be performed by examining individual relationships between independent and dependent variables. Board independence holds a positive relationship with the level of disclosure of forward-looking information. Furthermore, board independence seems to influence negatively on the release of forward-looking information about the activity of the company and positively on the disclosure of financial forward-looking information. More independent boards tend to provide more forward-looking information about financial topics, by reducing the disclosure of forward-looking information about the activity of the company. - Insert Table 4 around here -
Table 5 contains the results obtained in the multivariate analysis. Since there is no correlation among independent variables, we can discard the existence of collinearity problems. The absence of heteroskedasticity and autocorrelation was also confirmed. Several models are presented in the multivariate analysis, and each model includes a different measure of forward-looking information (dependent variable). Model 1 and 2 show the influence of board characteristics on the quantity and coverage of forward-looking information. Models from 3 to 8 show an analysis in detail about the influence of board characteristics on the disclosure of different kind of forward-looking information. According to previous studies, coverage is associated to quality of the information. Moreover,
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financial forward-looking information is usually quantitative, and can be considered as financially verifiable forward-looking information. This kind of information is more valuable in capital markets, since it helps to increase accuracy and reduce dispersion in earnings forecasts (Bozzolan et al., 2009). Consequently, coverage (model 2), and financial forward-looking information (model 6) are specifically associated to the usefulness of forward-looking information. - Insert Table 5 around here -
Theoretical arguments suggest that there is no positive relationship between board size and the quality of the information disclosed by companies. Results indicate that board size influence positively on the quantity of forward-looking information published in annual reports. However, as it was expected, board size does not affect the quality of disclosure of forward-looking information. Neither the coverage nor the financial forward-looking information indicates any significant association with board size. Larger boards might feel a stronger pressure to release more information, but coordination problems make them less efficient to improve quality of forward-looking information.
Results indicate that board composition influences the quality of the disclosure of forwardlooking information. Independent directors are aware of the importance of financial forward-looking information, and hence, they influence on disclosure strategies by improving the quality of this kind of information. Board independence does not influence the quantity of forward-looking information, but it influences the coverage. Companies with more independent boards tend to provide less redundant information, disclosing forwardlooking information about more different topics. Model 2 shows a positive association between board independence and coverage of forward-looking information. The coefficient, significant at the level of 5%, presents a value of 0.406. In addition, boards compose by a higher proportion of independent directors provide more financial forwardlooking information. The relationship is significant at 1%, with a value of 0.502. This kind of information has usually a quantitative nature, being financially verifiable, and hence, more valuable for investors. This information is extremely useful in capital markets to improve analysts’ forecasts, and it directly contributes to improve transparency in markets and other associated benefits. These companies provide more financial forward-looking information by disclosing less forward-looking information about strategy. Board independence influences negatively on the disclosure of forward-looking information about the activity of companies (the value of the coefficient is -0.369, being significant at the level of 5%).
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The inexistence of relationship between CEO duality and disclosure of forward-looking information is also found in previous studies (Barako, Hancock and Izan, 2006; Cheng and Courtenay, 2006). The presence of an independent CEO does not seem to be sufficient to influence the quality of the disclosure of forward-looking information.
Results indicate that companies lead different disclosure strategies about forward-looking information. Board characteristics influence these strategies, and this evidence will be of interest to investors and regulators.
5. Concluding remarks The purpose of this project was to investigate the influence of corporate governance mechanisms on forward-looking information disclosure in annual reports. In particular, we focused on the board of directors’ characteristics. Forward-looking disclosure strategies are determined by looking at different measures of forward-looking information: quantity (QNT), coverage (COV), information about activity (ACT), environment (ENV), financial (FIN), about organization and corporate governance (ORG) and intellectual capital (INT). Previous literature suggests that coverage of information and financial forward-looking information are attributes associated to the quality of information.
Results indicate that board size influence positively on the quantity of forward-looking information published in annual reports, but not on information quality. However, more independent boards of directors influence positively on the quality of forward-looking information disclosed by the companies in the sample. This result seems to suggest that independent directors are aware of the need of increase the quality of this kind of information, to improve analysts’ forecasts and hence, market transparency.
Our study shows that forward-looking information disclosure strategies are influenced by board of directors’ characteristics, therefore making a contribution to the literature that explores the connections between corporate governance and disclosure. This evidence will have direct economic implications on both shareholders and regulators, who might influence forward-looking disclosure strategies by managing the composition and characteristics of the board of directors.
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6. References
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Table 1 Disclosure index composition Categories
Items
I. Activity
1. 2. 3. 4.
Products share and market share Productive process Products and innovation Other activities that influence earnings
II. Environment
5. Legal aspects 6. Political, social and economic aspects 7. Industry topics
III. Strategy
8. Investment in R&D, human resources and other intangibles 9. Investment in capacity 10. Quality measures and commercial policies 11. Company market analysis and competitor analysis 12. Discussion about corporate strategy 13. Investment / Financing by segments or geographic 14. Risk exposure 15. Dividends distribution
IV. Financial
16. 17. 18. 19. 20.
V. Organization and corporate governance
21. Organizational structure 22. Board organization and management members 23. Activity of corporate governance mechanisms in general
VI. Intellectual capital
24. Internal structure 25. External structure 26. Human capital
Activity ratios (ROA, ROE, etc.) Cash-flow and earnings Financial structure Costs evolution / distribution Shares and market capitalization
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Table 2 Definition of variables Variables
Description
Measure
Dependent variables QNT
Quantity of forward-looking information
Number of sentences containing forward-looking information
COV
Coverage of forward-looking information
Items disclosed / Total possible items
ACT
Forward-looking information about activity
Percentage of forward-looking information about activity
ENV
Forward-looking information about environment
Percentage of forward-looking information about environment
STR
Forward-looking information about strategy
Percentage of forward-looking information about strategy
FIN
Financial forward-looking information
Percentage of financial forward-looking information
ORG
Forward-looking information about organization and corporate governance
Percentage of forward-looking information about organization and corporate governance
INT
Forward-looking information about intellectual capital
Percentage of forward-looking information about intellectual capital
Independent and control variables BSIZE
Board size
Number of directors in the board
BIND
Board independence
Proportion of independent directors in the board
DUAL
Duality of roles for Chief Executive Officer and Chairman of the board
Dummy variable: 0 if CEO is also the Chairman; 1 otherwise
SIZE
Company size
Total assets (millions of dollars)
ROE
Return on equity
Net profit / Equity
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Table 3 Descriptive statistics (40 companies) a
Variables
Mean
Standard deviation
Minimum
Maximum
6.00 0.12 0.00 0.00 0.00 0.00 0.00 0.00
48.00 0.58 0.52 0.83 0.59 0.79 0.15 0.46
Dependent variables QNT COV ACT ENV STR FIN ORG INT
21.00 0.37 0.20 0.10 0.28 0.30 0.02 0.11
8.29 0.11 0.12 0.16 0.13 0.19 0.04 0.12
Independent and control variables BSIZE BIND DUAL SIZE ROE
12.93 0.82 0.35 352,780 19.25
2.26 0.06 0.48 534,253 32.36
a
8.00 0.64 0.00 12,667 -134.52
17.00 0.93 1.00 2,187,631 99.95
QNT measures the quantity of forward-looking information taking into account the number of sentences. COV considers the number of items disclosed over the total number of items that a company might disclosed. ACT reflects the proportion of forward-looking information disclosed about activity of a company. ENV reflects the proportion of forward-looking information disclosed about environment. STR reflects the proportion of forward-looking information disclosed about strategy of a company. FIN reflects the proportion of financial forward-looking information disclosed. ORG reflects the proportion of forward-looking information disclosed about organization and corporate governance. INT reflects the proportion of forward-looking information disclosed about capital intellectual. BSIZE is measured by the number of directors in the board. BIND represents the independence of the board. DUAL refers to the independence of the Chief Executive Officer (0 if CEO assumes also the role of chairman, 1 otherwise). SIZE is measured by the total assets of a company (millions of dollars). ROE is measured by the return on equity.
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Table 4 Spearman coefficients
QNT
COV
ACT
ENV
STR
FIN
ORG
INT
BSIZE
BIND
DUAL
SIZE
QNT
1
COV
0,722**
1
ACT
0,048
0,043
1
ENV
-0,260
-0,251
0,099
1
STR
-0,112
0,083
-0,378*
-0,311
1
FIN
0,347*
0,109
-0,263
0,079
-0,513**
1
ORG
0,131
0,233
-0,207
-0,132
0,053
0,007
1
INT
-0,115
0,024
-0,004
-0,433**
0,082
-0,425**
-0,058
1
BSIZE
0,178
-0,031
-0,038
-0,145
-0,095
0,257
-0,001
-0,075
1
BIND
0,393*
0,444**
-0,461**
-0,036
-0,140
0,544**
0,126
-0,121
0,202
1
DUAL
0,020
-0,071
0,238
-0,257
-0,030
-0,057
-0,219
0,277
0,312
-0,187
1
SIZE
-0,133
-0,054
-0,404*
0,093
0,149
0,064
0,162
-0,062
0,360
0,184
-0,041
1
ROE
-0,090
0,184
0,087
-0,184
0,043
-0,033
-0,081
0,013
-0,302
0,084
-0,177
-0,268
** Significant at 0.01 level. * Significant at 0.05 level. a QNT measures the quantity of forward-looking information taking into account the number of sentences. COV considers the number of items disclosed over the total number of items that a company might disclosed. ACT reflects the proportion of forward-looking information disclosed about activity of a company. ENV reflects the proportion of forward-looking information disclosed about environment. STR reflects the proportion of forward-looking information disclosed about strategy of a company. FIN reflects the proportion of financial forward-looking information disclosed. ORG reflects the proportion of forward-looking information disclosed about organization and corporate governance. INT reflects the proportion of forward-looking information disclosed about capital intellectual. BSIZE is measured by the number of directors in the board. BIND represents the independence of the board. DUAL refers to the independence of the Chief Executive Officer (0 if CEO assumes also the role of chairman, 1 otherwise). SIZE is measured by the total assets of a company (millions of dollars). ROE is measured by the return on equity.
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Table 5 Mulvariate analysis Dependent variable: Measures of forward-looking information Model 1
Model 2
Model 3
Model 4
Model 5
Model 6
Model 7
Model 8
QNT
COV
ACT
ENV
STR
FIN
ORG
INT
Intercept
-24.374 (-1.394)
-0,141 (-0.714)
0.677** (2.848)
0.289 (0.884)
0.728* (2.546)
-1.109** (-3.053)
0.012 (0.134)
0.412 (1.736)
BSIZE
0.327* (1.947)
0.003 (0.016)
0.038 (0.249)
-0.175 (-0.944)
-0.146 (-0.837)
0.240 (1.532)
0.013 (0.072)
-0.231 (-1.306)
BIND
0.299 (1.907)
0.406* (2.641)
-0.306* (-2.170)
-0.035 (-0.200)
-0.218 (-1.339)
0.502** (3.438)
-0.018 (-0.107)
-0.147 (-0.892)
DUAL
0.028 (0.169)
0.074 (0.457)
0.289 (1.954)
-0.041 (-0.225)
-0.056 (-0.326)
-0.026 (-0.168)
-0.261 (-1.458)
0.215 (1.240)
SIZE
-0.257 (-1.589)
-0.054 (0.339)
-0.394* (-2.702)
0.142 (0.792)
0.321 (1.911)
-0.196 (-1.298)
-0.013 (-0.073)
0.221 (1.294)
ROE
-0.015 (-0.096)
0.269 (1.746)
-0.061 (-0.428)
-0.053 (-0.303)
0.192 (1.176)
-0.065 (-0.446)
-0.075 (-0.437)
0.118 (0.710)
0.215
0.246
0.363
0.043
0.155
0.320
0.066
0.128
0.099
0.135
0.270
-0.098
0.031
0.220
-0.071
0.000
1.857 (0.128)
2.217 (0.075)
3.878 (0.007)
0.305 (0.906)
1.249 (0.308)
3.196 (0.018)
0.484 (0.786)
1.001 (0.432)
Explanatory a variables
R
2 2
ADJUSTED R F (p-value)
** Significant at 0.01 level. * Significant at 0.05 level. a QNT measures the quantity of forward-looking information taking into account the number of sentences. COV considers the number of items disclosed over the total number of items that a company might disclosed. ACT reflects the proportion of forward-looking information disclosed about activity of a company. ENV reflects the proportion of forward-looking information disclosed about environment. STR reflects the proportion of forward-looking information disclosed about strategy of a company. FIN reflects the proportion of financial forward-looking information disclosed. ORG reflects the proportion of forward-looking information disclosed about organization and corporate governance. INT reflects the proportion of forwardlooking information disclosed about capital intellectual. BSIZE is measured by the number of directors in the board. BIND represents the independence of the board. DUAL refers to the independence of the Chief Executive Officer (0 if CEO assumes also the role of chairman, 1 otherwise). SIZE is measured by the total assets of a company (millions of dollars). ROE is measured by the return on equity.
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