Corporate Governance and Disclosure Quality: Taxonomy of Tunisian Listed Firms Using the Decision Tree Method based Approach

Authors

  • Wided Khiari

DOI:

https://doi.org/10.5195/emaj.2013.33

Abstract

This study aims to establish a typology of Tunisian listed firms according to their corporate governance characteristics and disclosure quality. The paper uses disclosed scores to examine corporate governance practices of Tunisian listed firms. A content analysis of 46 Tunisian listed firms from 2001 to 2010 has been carried out and a disclosure index developed to determine the level of disclosure of the companies. The disclosure quality is appreciated through the quantity and also through the nature (type) of information disclosed. Applying the decision tree method, the obtained Tree diagrams provide ways to know the characteristics of a particular firm regardless of its level of disclosure. Obtained results show that the characteristics of corporate governance to achieve good quality of disclosure are not unique for all firms. These structures are not necessarily all of the recommendations of best practices, but converge towards the best combination. Indeed, in practice, there are companies which have a good quality of disclosure but are not well governed. However, we hope that by improving their governance system their level of disclosure may be better. These findings show, in a general way, a convergence towards the standards of corporate governance with a few exceptions related to the specificity of Tunisian listed firms and show the need for the adoption of a code for each context. These findings shed the light on corporate governance features that enhance incentives for good disclosure. It allows identifying, for each firm and in any date, corporate governance determinants of disclosure quality. More specifically, and all being equal, obtained tree makes a rule of decision for the company to know the level of disclosure based on certain characteristics of the governance strategy adopted by the latter.

References

Archambault, J.J. & Archambault, M.E. (2003), “A Multinational Test of Determinants of corporate Disclosure”, The International Journal of Accounting, Vol. 38 N. 2, pp 173-194.

Bushee, B., & Noe, C.( 2000), “Corporate Disclosure Practices, Institutional Investors, and Stock Return Volatility”, Journal of Accounting Research, Vol. 38, pp 171-202.

Chau, G.K. & Gray, S.J. (2002), “Ownership structure and corporate voluntary disclosure in Hong Kong and Singapore”, The International Journal of Accounting, Vol. 37, pp 247 – 265.

Chen, C.J.P. and Jaggi, B. (2000), “Association between independent non executive directors ,family control and financial disclosure in Hong Kong”, Journal of Accounting and Public Policy, Vol. 19, pp 285-310.

El-Gazzar, S.M. (1998), “Predisclosure information and institutional ownership: A crosssectional examination of market revaluations during earnings announcement periods”, The Accounting Review, Vol. 73 N. 1, pp 119–129.

Erkens, D.H. and al. (2012), “Corporate Governance in the recent Financial Crisis: Evidence from Financial Institutions Worldwide”, Journal of Corporate Finance, Vol. 18, pp 389-411.

Feleaga, N. and al. (2011), “Corporate Governance in Emerging Economies: The Case of Romania”, Theoretical and Applied Economics, Vol. 8 N. 9, pp 5-16.

Gelb, D.S. (2000), “Managerial Ownership and Accounting Disclosure: An Empirical Study”, Review of Quantitative Finance and Accounting, Vol. 15 N. 2, pp 169-185.

Gul, F.A. & Leung, S. (2004), “Board leadership, outside directors’ expertise and voluntary corporate disclosures”, Journal of Accounting and Public Policy, Vol. 23, pp 351 – 379.

Ho, S.S.M. & Wong, K.S.(2001), “A study of the relationship between Corporate Governance structures and the extent of voluntary disclosure”, Journal of International Accounting, Auditing and Taxation, Vol. 10, pp.139-156.

Jensen, M.C. (1993), “The Modern Industrial Revolution, Exit and the Failure of Internal Control Systems”, Journal of Finance, Vol. 48, pp 831– 880.

Mak, Y.T. & Li, Y. (2001), “Determinants of corporate ownership and board structure: Evidence from Singapore”, Journal of Corporate Finance, Vol. 7 N. 3, pp 235-256.

Mangena, M., & Tauringana, V. (2007), “Disclosure, corporate governance and foreign share ownership on the Zimbabwe stock exchange”, Journal of International Financial Management and Accounting, Vol. 18 N. 2, pp 53-85.

Mulili, B. M. &Wong, P. (2011), “Corporate Governance Practices in Developing Countries: The Case for Kenya”, International Journal of Business Administration, Vol. 2 N. 1, pp 14-27.

Shanikat, M. & Abbadi, S.S. (2011), “Assessment of Corporate Governance in Jordan: An Empirical Study”, Australasian Accounting Business and Finance Journal, Vol. 5 N. 3, pp 93-106.

Standard & poor’s (2008), “Criteria: Gamma scores”, available at http://www.standardandpoors.com/home /en/us

Tsamenyi, T., Enninful-Adu, E. & Onumah, J. (2007), “Disclosure and Corporate governance in Developing Countries: evidence from Ghana”, Managerial Auditing Journal, Vol. 22 N. 3, pp 319-334.

Downloads

Published

2013-09-17

Issue

Section

Articles