Journal of International Accounting,
Auditing & Taxation 10 (2001) 139 –156
A study of the relationship between corporate governance
structures and the extent of voluntary disclosure
Simon S.M. Ho*, Kar Shun Wong
School of Accountancy, The Chinese University of Hong Kong, Shatin, N.T., Hong Kong
The primary objective of this study is to test a theoretical framework relating four major corporate
governance attributes with the extent of voluntary disclosure provided by listed ﬁrms in Hong Kong.
These corporate governance attributes are the proportion of independent directors to total number of
directors on the board, the existence of a voluntary audit committee, the ...view middle of the document...
* Corresponding author. Fax: ϩ(852) 2603-6604.
E-mail address: simon @baf.msmail.cuhk.edu.hk (S.S.M. Ho).
The helps given by the two anonymous reviewers and the Editors are gratefully acknowledged.
1061-9518/01/$ – see front matter © 2001 Elsevier Science Inc. All rights reserved.
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S.S.M. Ho, K.S. Wong / Journal of International Accounting, Auditing & Taxation 10 (2001) 139 –156
However, the simple adoption of more International Accounting Standards (IAS) is not
sufﬁcient to resolve the transparency problem in these countries. Whether the quality of the
actual corporate disclosures satisﬁes investors’ information needs is more central.
Mandatory disclosure rules ensure equal access to basic information (Lev 1992), but this
information has to be augmented by ﬁrms’ voluntary disclosures and information production
by intermediaries. There are major market incentives to disclose information voluntarily and
managers’ attitudes to voluntary disclosure change according to the perceived relationship of
the costs and beneﬁts involved (e.g., see Gray, Radebaugh and Roberts 1990; Healy and
Palepu 1995). Voluntary disclosure and its determinants have been identiﬁed as an important
research area in ﬁnancial reporting since the 1970s. Previous studies on the determinants of
voluntary disclosure have been done mainly in the U.S. and other developed countries (e.g.,
Malone, Fries and Jones 1993; Schadewitz 1994; Raffournier 1995; Lang and Lundholm
Some studies have examined institutional mechanisms (i.e., corporate governance) that
may inﬂuence voluntary disclosure practice. Corporate governance attributes examined in
these studies include ownership structure (e.g., Craswell and Taylor 1992; Mckinnon and
Dalimunthe 1993; Hossain, Tan and Adams 1994; Raffournier 1995), the proportion or
existence of independent directors (e.g., Forker, 1992; Malone, Fries and Jones 1993), the
appointment of a nonexecutive director as chairman, (e.g., Forker 1992), and the existence
of an audit committee (e.g., Forker 1992).
However, previous research only studied the effect of one single corporate governance
attribute and very few of them examine different governance attributes in a single study. The
ﬁndings of these studies also may not be applicable to Eastern economies which have
different regulatory and cultural environments. Examining the relationship between corporate governance attributes and corporate disclosure behavior in Hong Kong, with its unique
regulatory (relatively nonstringent disclosure requirements compared to U.K. and U.S.) and
corporate ownership environment (most listed ﬁrms are family- or individual-controlled),
could provide valuable input to a debate that is increasingly becoming international.
The main objective of this study is therefore to test the relationship between a set of
corporate governance factors (see Fig. 1) and the extent of voluntary...