Determinants, mechanisms and consequences of corporate governance reporting: a research framework
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Determinants, mechanisms and consequences of corporate governance reporting: a research framework Charl de Villiers1,2 · Ruth Dimes1
© Springer Science+Business Media, LLC, part of Springer Nature 2020
Abstract Corporate governance disclosures form a key part of a company’s non-financial reporting. Several studies consider the determinants of corporate governance reporting, including external factors such as country-specific legislation and scandals, and internal factors such as financial performance, size and culture. Others consider the consequences of corporate governance reporting, using simple proxies for corporate governance mechanisms such as board composition characteristics to analyse the impact on financial reporting quality and company valuation. Yet the determinants and consequences of corporate governance reporting may be interlinked, and many quantitative studies fail to consider these links and their multiple effects adequately. Poor financial performance, for example, can be both a determinant and a consequence of the underlying governance mechanisms that corporate governance reporting aims to capture. The framework provided in this paper considers both the determinants and consequences of corporate governance and likely links between them, and also considers internal corporate governance mechanisms and the measures that are used as their proxies. In combining these three aspects of corporate governance and showing potential links, the framework offers insights into future research opportunities. The framework can be adapted to any country or organisational setting and also offers the opportunity to consider theories other than agency theory when studying corporate governance disclosures. Keywords Corporate governance model · Corporate governance determinants · Corporate governance mechanisms · Corporate governance consequences
* Charl de Villiers [email protected] Ruth Dimes [email protected] 1
The University of Auckland, Auckland, New Zealand
2
University of Pretoria, Pretoria, South Africa
13
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C. de Villiers, R. Dimes
1 Introduction Corporate governance is the “exercise of ethical and effective leadership by the governing body towards the achievement of the following governance outcomes: ethical culture, good performance, effective control and legitimacy” (IODSA 2016), p20, and relates to the way that firms are governed rather than to the way they are managed. Reporting on corporate governance traditionally aimed to address and disclose relevant issues faced by boards of directors which were of interest to company stakeholders (Tricker 2015), although recently the range of interested stakeholders, and the concept of governance, has become much broader (Lai et al. 2019). Corporate governance reporting can be considered part of the wider literature on corporate non-financial reporting, being subject to many of the same external and internal influences. However, there are also some specific features (such as corporate governance ranking scores)
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