Impact of the busyness and board independence on the discretionary disclosures of Indian firms

Abstract

Purpose The purpose of this paper is to empirically investigate the impact of board characteristics such as size, independence, busyness and duality on the extent of discretionary disclosures of listed Indian firms. Design/methodology/approach A disclosure index with 110 items was constructed to assess the discretionary disclosures in the annual reports of listed firms. The study measured disclosure using 1,024 firm-year observations over 8 years from 2009 to 2016. Board characteristics such as size, independence, busyness and duality have been used in the study as indicators of corporate governance. Findings The results indicate that while the proportion of independent directors positively impacts the extent of discretionary disclosures, boards with duality and the busyness of the director have a negative impact. The size of the board does not significantly impact the extent of disclosures. Research limitations/implications This study examines the discretionary disclosures made only in the annual reports. Future studies could examine information disclosed in other media. Moreover, this study uses an un-weighted self-constructed disclosure index, which is subject to its inherent limitations. Originality/value This study has examined the impact of the “busyness” of the director on the extent of disclosures. This variable has not been explored in prior studies. The significance of the variable indicates that the number of directorships held impacts the efficiency with which a director performs his/her role in the board. The study reiterates the need for firms and policymakers to focus on improving board independence and to move away from leadership structures with duality.

Effects of board characteristics on information asymmetry: Evidence from the alternative investment market

“…This paper studies six mechanisms of board composition (board size, board independence, board financial expertise, board busyness, CEO duality, and board gender diversity) in order to explore their impact on information asymmetry. Board size (BoDS) is defined as the aggregate number of members on the board [ 102 ]; board independence (BINED) is defined as the total number of independent directors to the total number of directors on the board [ [103] , [104] ] ; board financial expertise (BFE) is defined as the total number of directors with accounting and finance degrees to the total number of directors on the board [ 62 , 105 ]; board busyness (BBusy) is described as the number of directors that serve on two or above boards to the total aggregate number of board directors [ 106 ]; CEO duality (CEOD) is measured by a dummy variable, which takes 1 if the CEO and the chairman are the same person and 0 otherwise [ 75 ]; and board gender diversity (BDG) is measured as the number of female directors to the total aggregate number of board directors [ 91 , 87 ].…”

“…The chairman and the CEO are considered to be the crucial leaders of corporations. The chairman is responsible for addressing strategic matters, setting agendas, leading the meetings of the board, representing the firm in front of other outside corporations, etc., whereas the CEO is responsible for managing the corporation and its daily operational responsibilities [ 75 ]. Normally, the posts of the chairman and CEO are held by two different individuals; however, it is not uncommon to find corporations where one individual holds the dual role of chairman and CEO of the board (referred to as duality).…”

“… ☆ Second, after reviewing extant board characteristics and information asymmetry studies, it is apparent that these papers have focused mostly on particular Attributes of board composition, such as board size [ 34 ]; board independence [ 1 ]; CEO duality [ 84 ]; gender diversity [ 91 , 87 ]; board size and board independence [ 112 ]; board size, board independence, and board financial expertise [ 113 ], and board size; and board independence and CEO duality [ [75] , [114] , [115] ] and their impact on information asymmetry. We contribute to the literature by concentrating on a wider range of board characteristics (board size, board independence, board financial expertise, board busyness, CEO duality, and board gender diversity) and their influence on information asymmetry.…”

The Effect of the Board of Directors’ Characteristics on Company Value

“…Therefore, Field, Lowry, and Mkrtchyan (2013) found a positve and significant relationship between busy board of directors and company value. Kavitha et al (2019) investigated the effect of busy board of directors on discretionary disclosures among 500 companies listed in India. They found that busy board of directors has negative impact on discretionary disclosures.…”

Corporate governance in India: A systematic review and synthesis for future research

“…58 Kavitha et al (2018) Discretionary disclosures is positively influenced by independent directors but negatively by boards with duality and the busyness of the director 59 Chauhan and Kumar (2017) Female directors face more attendance problems compared to male directors, and are less likely to be employed in monitoring-related committees. 73 Chahal and Kumari (2013) Boardroom characteristics have an insignificant impact on business performance, while audit committee and ownership structure have a significant impact on business performance.…”