Narrative forward-looking information disclosure, do ownership concentration, boardroom gender diversity and cultural values matter? A cross country study

Abstract

Purpose This study aims to identify the main factors that drive the differences in the levels of forward-looking information disclosure (FLID) across four countries. This study goes beyond the firm-specific characteristics to the countries-specific factors to explain the observable differences in the level of FLID among the UK, Italian, Hong Kong and Chinese American Depositary Receipts (ADRs) firms trading in US Exchanges. Design/methodology/approach To validate the levels of FLID, corporate financial information environment (CFIE)-final reports structure extractor (FRSE) was conducted on the annual reports of a sample of 353 listed firm observations in 2020 across four different countries. Also, the ordinary least square regression model was used to examine the proposed relationships. Findings The empirical results indicate that the level of FLID is highest among the Chinese ADRs firms trading in US Exchanges and UK listed firms. Also, ownership concentration and gender diversity have a positive correlation with the level of FLID. Additionally, long-term orientation positively influences the level of FLID. Considering the moderation effect of power distance and masculinity dimensions, countries with larger power distance tend to have a lower impact of ownership concentration on the level of FLID, whereas countries with higher masculinity tend to have a lesser positive relationship between gender diversity and the level of FLID. Originality/value Notwithstanding, this study provides novel and persuasive evidence regarding the effects of firm- and country-specific characteristics as possible determinants of forward-looking disclosures, drawing on evidence from international companies with free floats, boards with female quotas and cultural values including masculinity and long-term orientation. This work offers unique insights from the upper echelons lens, which implies that firms need to obtain a critical mass of gender diversity to achieve a more balanced forward-looking perspective on their annual reports.

How gender diversity in boards affects disclosure? A literature review

“…They provide empirical evidence regarding the positive impact that female directors and female CEOs exert on the level of narrative disclosure of this information. Similar results are reported by Abdallah and Eltamboly (2022) and Abdallah (2023). In particular, Abdallah and Eltamboly (2022) document that firms with higher gender diversity on their boards exhibit a larger level of forward‐looking information disclosure, especially within feminine countries.…”

“…Similar results are reported by Abdallah and Eltamboly (2022) and Abdallah (2023). In particular, Abdallah and Eltamboly (2022) document that firms with higher gender diversity on their boards exhibit a larger level of forward‐looking information disclosure, especially within feminine countries.…”

“…Additionally, as individuals organise their identities based on reference groups which, in turn, are affected by the large‐scale context (i.e., countries, regions, or cities) (Fitzsimmons, 2013), researchers are recommended to investigate the role of the external context in which boards operate. For instance, Abdallah and Eltamboly (2022) adopt Hofstede's model and document that masculinity/femininity as national cultural dimensions can moderate the relationship between board gender diversity and the level of forward‐looking information disclosure. To analyse these contextual factors, qualitative research techniques could be employed, for they allow to search into individuals' experiences and, thus, to gain insights into the complexities of different cultures.…”