Board compensation and disclosure quality: corporate governance interference

Abstract

This paper investigates the impact of financial information disclosure quality on board compensation in various corporate governance mechanisms in Iran. A unique data set from a sample of 176 Iranian listed firms over the period 2010-2016 is used in order to address the following questions: as an incentive mechanism for managers, is there any relationship between compensation and disclosure quality of financial information while some corporate governance factors are interfered? Duality on board, educated members, females, and independent members are the aspects that are considered as corporate governance interference. Along with these issues, we investigate whether firm complexity is likely to affect the mentioned relationship. We find that corporate governance mechanisms including educated board members, independent members, females, and board members duality are not some reward-enhancing methods. This lends support to the conjecture that directors neglect the quality of information they provide, and as a consequence, they adjust their bonuses via other methods. Our findings indicate that there is a significant and positive relationship between board compensation and disclosure quality in firms which have complex activities and foreign sales. Finally, we indicate that disclosure quality has no significant impact on compensation in firms which have complex activity of controlling some subsidiaries.

The impact of longer audit committee chair tenure and board tenure on the level of sustainability disclosure: The moderating role of firm size

“…In a recent scholarly investigation by Salehi and Farzaneh (2018), noteworthy findings have emerged, highlighting a positive correlation between a board's human capital and its performance, alongside the relationship between managerial share ownership and performance within the context of the Tehran Stock Exchange. Furthermore, the research conducted by Salehi et al (2018) reveals a significant and positive association between board compensation and disclosure quality, particularly in companies engaged in complex activities and foreign sales.…”

Market value and related party's transactions: a panel data approach

“…Many studies that looked at board of director size discovered that a small board of directors is better than a large board of directors, arguing that more board members increase constraints to directors' communication and coordination and reduce board members' ability to supervise top management, resulting in more agency issues and a negative effect on company performance (Liang et al, 2013;O'Connell and Cramer, 2010). The presence of independent directors on the board is thought to reduce the usage of RPTs (Bona-S anchez et al, 2017; Salehi et al, 2018;Gavana et al, 2022;Ismail et al, 2022;Salehi et al, 2022a, b). Perry (2000), in his results, found that the director's bonus compensation has a positive effect on the director's performance.…”

“…The presence of independent directors on the board is thought to reduce the usage of RPTs (Bona-Sánchez et al. , 2017; Salehi et al. , 2018; Gavana et al.…”

The Influence of Transparency and Disclosure on the Valuation of Banks in India: The Moderating Effect of Environmental, Social, and Governance Variables, Shareholder Activism, and Market Power

“…Directors on corporate boards may receive equity-based compensation for their service. Sengupta and Zhang (2015) and Salehi et al (2018) set forth that such compensation offers private benefit incentives. The growth of directors' equity may direct board members to maximise the value of their own equity stake in the firm rather than safeguarding shareholder interests.…”