Board effect and the moderating role of CEO/CFO on corporate governance disclosure: evidence from East Africa

Fulgence, S., Boateng, A., Wang, Y. ORCID: 0000-0001-5438-4255 and Kwabi, F., 2022. Board effect and the moderating role of CEO/CFO on corporate governance disclosure: evidence from East Africa. The International Journal of Accounting. ISSN 1094-4060 (Forthcoming)

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Abstract

Research Problem: This study examines the effects of board size, board independence, and the interaction effect between board independence and CEO/CFO on corporate governance disclosure practices.

Motivation: Despite corporate governance (CG) reforms around the world, research evidence indicates that the levels of corporate governance disclosures (CGDs) in developing countries remain poor due to weak institutions and corporate governance systems. In particular, the corporate boards as a key mechanism of CG and the board nomination processes in East Africa remain largely opaque and dominated by majority shareholders, Chief Executive Officers and Chief Finance Officers (CEOs/CFOs), giving rise to opportunistic behaviours which may be detrimental to firm value. The distinctive feature of the board nomination process/CG system in East Africa has implications for monitoring and corporate governance disclosure practices and compliance and calls for systematic research in this under-explored subject.

Target Population: Stakeholders including firm managers, practitioners, regulatory authorities, policymakers and investors.

Methodology: Ordinary least squares (OLS), fixed effect model and system GMM.

Analyses: Using a large and hand-collected dataset comprising 1,000 firm-year observations from 2007 to 2017 in East Africa, this study develops a corporate governance disclosure index (CGDI) of East Africa consisting of 164 provisions. To test our hypotheses, this study adopts three analytical approaches, namely OLS and fixed effect (FE) regressions and the two-stage system GMM to address the endogeneity concerns.

Findings: We find that large boards and independent directors are associated with greater disclosure of CG information. Different from environments with stronger institutions and corporate governance systems, our analysis suggests that the CEO/CFO power negatively moderates the link between board independence and corporate governance disclosure. Thus, firms whose CEO and CFO are involved in remuneration or nomination committees disclose less CG information. The combined effect of CEO and CFO on selection and remuneration committees and independent board in reducing corporate disclosure appears more pronounced for the post-financial crisis period compared to the crisis period.

Item Type: Journal article
Publication Title: The International Journal of Accounting
Creators: Fulgence, S., Boateng, A., Wang, Y. and Kwabi, F.
Publisher: Elsevier
Date: 6 June 2022
ISSN: 1094-4060
Identifiers:
NumberType
1566888Other
Divisions: Schools > Nottingham Business School
Record created by: Linda Sullivan
Date Added: 21 Jul 2022 13:36
Last Modified: 21 Jul 2022 13:36
URI: http://irep.ntu.ac.uk/id/eprint/46660

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