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Synopsis

The research problem

This study examines the effects of board size and board independence, as well as the interaction effect between board independence and CEOs/CFOs on corporate governance disclosure practices.

Motivation

Despite corporate governance (CG) reforms around the world, research evidence indicates that the levels of corporate governance disclosures (CGDs) in developing countries remain poor due to weak institutions and corporate governance systems. In particular, the corporate boards as a key mechanism of CG and the board nomination processes in East Africa remain largely opaque and dominated by majority shareholders, chief executive officers, and chief finance officers (CEOs/CFOs), giving rise to opportunistic behaviors that may be detrimental to firm value. The distinctive feature of the board nomination process/CG system in East Africa has implications for monitoring and corporate governance disclosure practices and compliance and calls for systematic research in this under-explored subject.

Hypotheses

H₁: The association between board size and corporate governance disclosure will be positive.

H₂: The association between board independence and corporate governance disclosure will be positive.

H_3a: The presence of the CEO on the nomination/remuneration committee will negatively moderate the relationship between board independence and corporate governance disclosure.

H_3b: The presence of the CFO on the nomination/remuneration committee will negatively moderate the relationship between board independence and corporate governance disclosure.

H_3c: The presence of the CEO and CFO on the nomination/remuneration committee will negatively moderate the relationship between board independence and corporate governance disclosure.

Target population

Stakeholders including firm managers, practitioners, regulatory authorities, policymakers, and investors.

Adopted methodology

Ordinary least squares (OLS), fixed-effects model, and system generalized method of moments (GMM).

Analyses

Using a large and hand-collected dataset comprising 1000 firm-year observations from 2007 to 2017 in East Africa, this study develops a corporate governance disclosure index (CGDI) of East Africa consisting of 164 provisions. To test our hypotheses, this study adopts three analytical approaches, namely OLS and fixed-effects (FE) regressions and the two-stage system GMM to address the endogeneity concerns.

Findings

We find that large boards and independent directors are associated with greater disclosure of CG information. Our analysis suggests that CEO/CFO power negatively moderates the link between board independence and corporate governance disclosure, unlike those environments with stronger institutions and corporate governance systems. Thus, firms whose CEO and CFO are involved in remuneration or nomination committees disclose less CG information. The combined effect of the CEO and CFO on selection and remuneration committees and an independent board in reducing corporate disclosure appears more pronounced for the post-financial crisis period compared with the crisis period.

In this chapter, I discuss how the information environment of a firm is affected by the functioning of the board. Independent opinion formation by directors, the richness of information that is brought to bear on board decisions, as well as inter-director communication, are essential for improving the information environment of a firm and the credibility that its disclosures instill in its investors. Specifically, I address board independence, gender and ethnic diversity among directors, and inter-director communication as factors that contribute to information quality. Because the incentives of directors are markedly different between family and diversified non-family firms, I discuss this aspect of ownership in the chapter. While board functioning is only one of the determinants of information quality, it is a critical one and therefore, an understanding of the board functioning and its links to information quality is of paramount importance.

Based on the CSMAR database, multiple linear regression models were constructed, which selected a sample of A-share listed agricultural enterprises data from 2011 to 2019, and the data were analyzed and processed by Stata software. The relationship between board independence, market competition, and the growth of agricultural enterprises was examined, and the interactive effects of market competition and board independence on that were discussed. The results showed that both market competition and board independence had a positive effect on the growth of agricultural enterprises, and the effect was an alternative. The study may provide a beneficial reference to the growth and governance of agricultural enterprises.