The Impact of Board Characteristics on the Disclosure of the Forward-Looking Evidence from the Egyptian Stock Market

Abstract

Purpose - The paper aims to empirically test the impact of the corporate governance mechanisms related to the board characteristics on the forward-looking disclosures of companies listed in the Egyptian stock market. Design/methodology/approach- This study used Board size, Board independence, Board CEO duality, and gender diversity as measures for corporate governance mechanism in relation to the board characteristics. Forward looking disclosures were investigated using a checklist that included 24 items distributed over 4 categories of disclosure (1- environment around the company, 2- Goals, strategies and business policies, 3- organization, management and corporate structure and 4- Financial issues) through a content analysis where a score was calculated by adding the sum of disclosed items in the company’s annual report and then divide them by the total number of items. Two control variables were used: firm size which was measured by the natural logarithm of total assets and auditor type which is a dummy variable taking a value of 0 for non-Big 4 audit firms and 1 for Big 4). The sample included the most active 30 companies (EGX30) in the Egyptian stock exchange market covering the period from 2010 till 2017. Data were analyzed using regression analysis.FindingsThe research findings showed a positive significant correlation between that CEO duality and the forward-looking disclosure, and a negative significant correlation between Board gender diversity and the disclosure of forward-looking information. The content analysis results for the company’s annual reports indicated that management is disclosing more qualitative forward-looking disclosures than the quantitative forward-looking disclosures. In addition, results showed that the auditor type and board company size have a positive impact on the disclosure of the forward-looking information. In contrast, the results did not show a significant correlation between board independence and the board size with the disclosure of the forward-looking information.