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uncertainties to which the firm is facing. In the same sense, the IASB have published in
October 2005 a project of accounting standard about the management report called
management commentary considered as been an integral part of the financial reporting of
the firm. This standard project has as objectives to guide the firm in the preparation of a
narrative report that includes non mandatory information. In addition, several directives are
appeared in the last years, such as the recommendations about Management Discussion and
Analysis (MD&A) recommended in Canada and the United States and recommended by the
commission of the IOSCO in its report about the general principles of the reporting of MD&A
in February 2003
Besides talking about accounting choices, we can talk about disclosure choices. Thus,
the accounting policy is not only in line with logic of optimization of the accounting choices,
but also of the economic communication. That means that managers have a large margin of
discretion allowing him to publish or no an information. Thus, voluntary disclosure is not a
fortuity act or related to the ignorance of the legal frame of disclosure, but an accounting
policy instrument that aims to reach certain objectives.
Based on the idea that a good governance guarantee an economic communication with
a better quality, the firm should put in place an efficient internal system of governance that
assure the protection of the shareholders against the managers opportunism. In this context
the studies of Cheung, Connelly, Limpaphayom and Zhou (2006), of Ho and Wong (2001), of
Eng and Mak (2003), of Chen and Jaggi (2000) and of Cheng and Courtenay (2006) have
supported that putting in place a guide of good practices of corporate governance helps
enhance voluntary disclosure in annual reports.
In this sense, the role of the board of directors consists in controlling and disciplining
the corporate management and then to assure that the managers behaves in the sense of
increasing the shareholders interests. This board prepares the annual reports under his
responsibility, thus his composition affect the extent of voluntary disclosure in annual reports.
Firms ownership structure is also likely to influence voluntary disclosure.
Tunisia is a developing country, with an emerging capital market, and whose
economic environment has been subject to major changes during the last years. In this
country, economic communication constitute an under regulated field and several Tunisian
firms dont disclose sufficient information in their annual reports, that helps users evaluate the
management performance, lighten their perception of the firm and evaluate the future
profitability of their investment.
The main question of this research is: how far the structure of ownership and the
composition of the board of directors influence the offer of voluntary information in the
annual reports of listed companies in Tunisia?
The principal objective of this research is then to analyze the interaction between the
composition of the board of directors (internal control mechanism) and the offer of voluntary
information in the annual reports (external control mechanism) in a context characterized by a
high ownership concentration.
This paper is organized as follows: the following section will be designed to present
the theoretical framework of transparency and voluntary disclosure. The third section will
present a revue of the previous research and the development of our hypothesis. The
verification strategy will be exposed in the fourth section while the fifth section presents a
discussion of our empirical results. And the last section includes our conclusions.
2. Theoretical framework of the transparency and voluntary disclosure in annual
reports
In this section, we exhibit the theoretical framework on which our study is based.
2
2.1.
2.1.1.
In addition, it is indicated in the new version of the article that the firm should insert in
its annual report other headings specific to its industry.
2.1.1.2.
The means to control voluntary disclosure in Tunisia
The elastic perimeter that characterizes voluntary disclosure, the malleability of non
audited and non standardized numbers, the suspicion that weighs upon the managers attitude,
shed light on the non credibility of the reporting information.
Accordingly to the article 266 of CSC, the verification of the concordance of the
information given in the management report with the annual accounts, is the responsibility of
the external auditors who gives their opinion toward financial statements.
2.1.2.
Trabelsi and al. (2005) outlined that in the last decades, we are witnessing a huge
mutations in the Tunisian economic environment, marked especially by the stimulation of the
financial market through motivating Tunisian firms by a financial direct access and the
improvement of the reporting of the listed firms.
The internationalization requires transparent economic information. Thus, the
presentation of annual reports with a high quality of disclosure guarantees the attraction of
foreign investors as well as local investors. According to Omran and al. (2008), the proportion
of the foreign blockholders in the Tunisian firms is 53% and that it is the highest percentage
comparing to Egypt, Oman and Jordan. Beyond their financial function, foreign investors
have an essential role in the reinforcement and the professionalization of the Tunisian
corporate disclosure. These investors required a very high level of transparency and
disclosure.
2.1.2.2.
What other firms in the same country and in the same industry disclose (mimetic
Isomorphism): In general, imitating another firms disclosure practices perceived as
the leader or the model is a good way for the firm to justify its actions (increase its
legitimacy).
What the firm has disclosed in the past: The ritual that is the actions that result from a
highly habitual and standardized process, are well known as the cornerstone of the
institutions.
2.2.2.
3.1.1.
associated to the firms performance. In this case, they have interest to maximize the firm
value, and then improve its communication strategy and respond better to investors
expectations from disclosure especially when the firms performance is bad.
In the same sense, according to Mohd Ghazali and Weetman (2006), Siala Ghorbel
(2005) and Eng and Mak (2003), there is a negative relation between the managerial
ownership and the extent of voluntary disclosure. In addition, Trabelsi and al. (2005) outlined,
in the Tunisian setting, that the managerial ownership has a negative effect on voluntary
disclosure.
When the directors hold an important proportion of the company capital, the
ownership and the management are combined. Thus, the company has no interest to disclose
further information while agency costs are low. We propose then the following hypothesis.
H 1.4: The extent of voluntary disclosure in annual report is negatively related to the
directors ownership
3.1.5.
3.2.1.
behave against the interests of smaller shareholders by reducing the quality of financial
disclosure. Indeed, a better financial disclosure helps reducing conflicts of interests between
large and small shareholders and allows protecting these latter.
Summa and Ben Ali (2006) outlined a negative and significant relation between the
quality of disclosure and ownership concentration. Therefore, voluntary disclosure is more
likely to be intensive in diluted ownership environment. In the same sense, Siala Ghorbel
(2005) stipulates that a diffused ownership increases agency costs and information
asymmetry, and as a result the needs of signaling. More the ownership concentration is low,
more the need to signalling increases and more the extent of disclosure is high.
However, Raffournier (1995) and Depoers (2000) didnt detect a significant influence
of the ownership concentration on the extent of disclosure.
These controversial results bring the research around to a non linear relation between
voluntary disclosure and ownership concentration. According to Labelle and Schatt (2005),
there is a curvilinear relation between diluted ownership and the quality of financial
communication. In the light of the results of previous studies, we verify the following
hypothesis.
H 2.1: The extent of voluntary disclosure in annual report is negatively related to the level of
ownership concentration.
3.2.2.
Chau and Gray (2002) and Trabelsi, Omri and Turki (2005) affirm the existence of a
negative relation between family control and voluntary disclosure. This can be explained by
the fact that family owned companies are less motivated to disclose beyond the obligatory
threshold. Ho and Wong (2001) demonstrate that firms that have a large proportion of family
members in the board of directors are more likely to have a less extent of disclosure.
In a family owned company, ownership is concentrate in the hand of the same family.
That represents a particular case of ownership concentration. This family participates actively
in the management of the company and in most of time part of the direction or of board of
supervision or of directors. This allows the family to access to all information that enables it
to be reassured about the future of its investment. Family controlled firms tend to provide less
external information since asking for information is low [Summa and Ben Ali (2006)]. We
propose to verify the following hypothesis.
H 2.3: The extent of voluntary disclosure in annual reports is lower for firms controlled by a
family.
3.3.
Mediator effect of the composition of the board of directors on the influence of
the ownership concentration on voluntary disclosure
Having almost all the information, large shareholders dominate the boards of directors
[Jilani and Ben Hammouda (2006)]. Mak and Li (2001) affirm that there is a relation between
ownership structure and the board of directors composition.
In order to investigate the indirect effect of many firms characteristics (especially
ownership concentration) on voluntary disclosure, Arcay and Vzquez (2005) use internal
mechanism of governance as mediator variable. According to these authors, ownership
structure has a negative and significant impact on adopting rules of good practices and
governance that also affects corporate disclosure. Hence, there is an indirect relation between
ownership concentration and voluntary disclosure mediated by internal governance
mechanisms.
We suppose that the mediator (board composition) represent a mechanism by which
ownership concentration influences voluntary disclosure extent. Ownership concentration
influences the mediator and this latter influence voluntary disclosure extent because its the
board of directors who prepares the annual reports (that contains voluntary disclosure) under
his responsibility. In other words, ownership concentration has an indirect effect on the extent
of voluntary disclosure. Thus, we attempt to verify the following hypothesis.
H 3: The composition of the board of directors is a mediator of the effect of the ownership
concentration on the extent of voluntary disclosure.
4. Methodology
4.1.
Tunisia is low) [Barako, Hancock and Izan (2006), Omri and al. (2005), Trabelsi and al.
(2005) and Hassan and al. (2006)].
Table 1: Distribution of observations
2003 2004 2005
Years
22
23
25
Number of firms
4.2.
4.2.1.
4.2.1.1.
obtained by the maximum possible score for each firm. Thus, the firms will not be penalized
by the non disclosure of some items if they are not relevant for their activities.
B- Weighted approach
We also use a weighted score, because we have chosen financial analysts as a
particular group of annual reports users. We have distributed 62 questionnaires to the
population of analysts. We obtained a level of response of 64.51%. The sample size of our
study is composed by 40 financial analysts and portfolio managers that work for 21
intermediate of the Tunisian stock exchange. Respondents have been called to express the
degree of importance they give to the items by giving a note in the Likhert 5 points scale
(with 1= not important to 5= very important).This approach consists in assigning to each item
a weighting that translates the relative importance of this item depending on the group of
users [Baker and Haslem (1973), Firth (1984), Bertrand (2000), Chow and Wong-Boren
(1987) and Michailesco (1999)]. Every diffused item is weighted by the mean of the points
that are attributed to him [Buzby (1975)]. The second used procedure is the following: an item
takes the weight that has been attributed to him by the financial analysts if it is disclosed
and 0 otherwise.
4.2.2.
13
We measure the independence of the board ICA by the proportion of the external
directors since they are supposed to be competent and more concerned by the shareholders
interest. This measure has been adopted by Nasir and Abdullah (2005). In our study, we
consider as externals: the directors that has no familiar link with the managers and that dont
have a direct and significant part in the capital of the firm.
ICA = number of external directors / number of directors
B-Size of the board
The size of the board of directors LNTCA is measured by the logarithm of the total
number of directors that compose the board. The use of this measure is justified by the
objective of mitigating heteroscedasticity problems. This measure has been used by Bouri and
Khlifi (2007).
LNTCA = Log (number of directors)
C-The existence of the structure of leadership in the board
This variable DUAL is a dummy variable that takes 1 if one person holds at the
same time the functions of chief executive officer (CEO) and chairman of the board and 0
otherwise.
D- Directors ownership
Like Bouri and Khlifi (2007), Eng and Mak (2003) and Trabelsi and al. (2005) we
measure managerial ownership (PADM) by the percentage of shares held by the members of
the board.
PADM = percentage of shares held by directors
E- Governance quality index
Arcay and Vzquez (2005) and Hajri and Omri (2005) insist on the interest to
synthesize all the governances mechanism in one variable because of the effect of
complementarities and substitutability that exist between them. We construct an index of the
governance quality IGOUV that is a variable that synthesize the characteristic of the board
except the dummy variable DUAL. We didnt take into consideration this variable because
we should use only continuous variables for factorial analysis. IGOUV is determined by a
factorial analysis that integrates the variable (ICA, TCA and PADM). It will constitute a
common factor that will be then used as a proxy for corporate governance quality.
We have chosen this index because the inclusion of all the variables in the same model
can be in the origin of multicolinearity problems. The choice of this methodology results
essentially from a need to gather in an objective way the variables that characterizes the
composition of the corporate board of directors.
Before starting factorial analysis, we have verified that the three variables are
significantly correlated (according to the correlation matrix). Indeed, the partial correlation of
the variables (taken two per two) presented by the index KMO is strong (0,624 > 0,5) which
means that the variables are highly correlated and thus we can wait for a weak number of
factors. In addition, Bartlett test indicates that the matrix of correlation is different from the
matrix of identity Test of Bartlett, chi-2 = 18,577; Sig = 0,000) which confirm that the
variables are highly correlated and thus factorable.
4.2.3.
4.2.3.1.
Competitiveness in the commodity market
Competitiveness in the market of goods and services is weak when the barrier of entry
of the sector is important, that is when the risk of new entries is low. We will use the
capitalistic intensity as proxy for the barriers of entry of the sector [Mami (2003), Aerts,
Cormier and Magnan (2004), Raffournier (1995), Chow and Wong-Boren (1987), Clarkson
and al. (1994) and Depoers (2000)]. The variable INTCAP is measured as follows:
INTCAP = gross fixed assets / total assets
We expect a positive relation between the capitalistic intensity and the extent of
voluntary disclosure in annual reports.
4.2.3.2.
Size of the firm
Ben Ali (2005), Lakhal (2003), Depoers (2000), Raffournier (1995), Buzby (1975),
Hassan, and al. (2006), Alsaeed (2005), Aksu and Kosedag (2006) and Lang and Lundholm
(1993) have confirmed the existence of a positive and significant relation between the firm
size and the quality of financial reporting.
Firm size is measured by the logarithm of total assets LNTA. The use of the logarithm
is justified by the objective of mitigating heteroscedasticity problems.
LNTA = Log (total assets)
We expect a positive relation between the size of the firm and the extent of voluntary
disclosure in annual reports.
4.2.3.3.
Indebtedness of the firm
Leung and al. (2005) have found a positive relation between indebtedness and
voluntary disclosure. Naser and al. (2006) affirm that the firms with high level of debts are
considered more risky. These companies meet difficulties during capital increase. And it is for
this reason that they are called to disclose more information explaining their financial
situation.
Indebtedness (END) is measured by the weight of creditors compared with
shareholders. Thus END is measured by dividing financial debts by equity.
END = total debts / equity
We wait for a positive relation between the indebtedness of the firm and the extent of
voluntary disclosure in annual report.
4.2.3.4.
Firm age
Gibbins and al. (1990) outlined that the history of the company influences its strategy
of reporting through:
-
The traditions of the enterprise (the traditions, the way of doing things)
LNCOT = Log (duration of the listing of the firm in the stock exchange in years)
We expect a positive relation between the period of listing and the extent of voluntary
disclosure.
4.2.3.5.
Auditors quality
In the meta-analysis made by Ahmed and Courtis (1999), it seems that the results of
the researches that investigate the effect of the quality of the auditor on the extent of
disclosure are mitigated. Some have confirmed a positive and significant relation; others have
found a positive but not significant relation, and others found no relation between the two
concepts, while others confirmed the existence of a negative relation. Archambault and
Archambault (2003), Leung and al. (2005) and Raffournier (1995) demonstrate that the firms
that are audited by an auditor among the big 4 audit companies disclose more information
than the others
This variable QAU is a dummy variable and takes 1 if the firm is audited by a big 4
and 0 otherwise. This measure has been adopted by Archambault and Archambault (2003)
and by Raffournier (1995).
We wait for a positive relation between the auditor quality and voluntary disclosure.
Indeed, big 4 audit companies motivate the audited companies to disclose information beyond
the obligatory threshold.
4.2.4.
Empirical design
IDIV it = 0 + 1 INTCAPit + 2 CONC it + 3 FAM it + 4 PINST it + 5 DUAL it + 6
NTCA it + 7 ICA it + 8 QAU it + 9 LNCOTit + 10 END it + 11 LNTA it + 12 PADM it
+ it
(Model 1)
IDIV it = a0 + a1 INTCAPit + a2 CONC it + a3 FAM it + a4 PINST it + a5 DUAL it + a6
IGOUV it + a7 QAU it + a8 LNCOTit + a9 END it + a10 LNTA it + it
(Model 2)
IDIV= index of voluntary disclosure. IGOUV= factor of variables (ICA. TCA et PADM). CONC = percentage of
shares held by the dominant shareholder. PINST= percentage of shares held by institutional investors. FAM=1
when the firm is controlled by a family and =0 otherwise. ICA = number of external directors / number of
directors. LNTCA = Log (number of directors). DUAL =1 if one person holds at the same time the functions of
CEO and chairman of the board and =0 otherwise. PADM = percentage of shares held by directors. INTCAP =
gross fixed assets / total assets. LNTA = Log (total assets). END = total debts / equity. LNCOT = Log (duration
of the listing of the firm in the stock exchange in years). QAU=1 if the firm is audited by a big 4 and = 0
otherwise.
Our study is based on the panel data, thats why it is convenient to verify the
homogenous specification of the generator process of the data. We should then distinguish
between the specific effect and the common effect through Fisher statistic (test of Chow).
5. Empirical results
In the following section we will analyze and comment our different empirical results.
5.1.
Descriptive statistics
Mean
2003
IDIV
IDIV
unweighted weighted
35,36
35,73
2004
IDIV
IDIV
unweighted
weighted
40,99
41,34
16
2005
IDIV
IDIV
unweighted
weighted
40,00
40,55
Median
Standard Deviation
Variation coefficient
N
38,36
11,45
0,323
38,02
11,27
0,315
38,00
12,58
0,306
22
21
IDIV= index of voluntary disclosure
38,53
12,24
0,296
41,94
11,46
0,286
24
42,65
11,92
0,294
Through this table, we notice an increase in the extent of voluntary disclosure between
2003 and 2004. The studies of Bughin and al. (2007) and of Naser and Nuseibeh (2003) also
demonstrate that the level of voluntary disclosure in annual reports tend to increase across the
time. We also notice that the standard deviation is important comparing to the mean, which
make us conclude the existence of variability in the behavior of voluntary disclosure among
the firms of our sample. In addition we have done an additional analysis like Singleton and
Globerman (2002) to verify if the voluntary disclosure practices tend to diverge or converge
among the enterprises of our sample. The comparison of the coefficient of variation of the
indexes IDIV of 2003 and 2004, and of 2004 and 2005 allow us to detect a decrease of this
coefficient which means that voluntary disclosure behavior in our firm sample tend to
converge across the time.
We have applied the non parametric test of means comparison of Mann-Whitiney on
the of voluntary disclosure global index variable IDIV weighted and unweighted across the
years: 2003-2004, 2003-2005 and 2004-2005. The procedure of tests for two independent
samples compares two groups of observations according to a continuous variable.
Table 3: Results of Mann-Whitiney test
2003-2004
Year
Mean rank
U of MannWhitney
Sig.
IDIV
unweighted
2003 2004
19,81 24,28
183
0,24
IDIV
weighted
2003 2004
19,77 24,33
182
2004-2005
IDIV
IDIV
unweighted
weighted
2004 2005 2004 2005
23,28 22,75 23,04 22,95
246
251
0,23
0,89
0,98
IDIV= index of voluntary disclosure
2003-2005
IDIV
IDIV weighted
unweighted
2003
2005
2003
2005
20,5
26,25
20,54
26,20
198
199
0,14
0,15
According to the mean rank, we notice that the extent of voluntary disclosure increases
from 2003 to 2004 (24,28 >19,81 and 24,33 >19,77) and becomes stable from 2004 to 2005
(23,28 22,75 and 23,04 22,95). These tests are significants, which make us accept the null
hypothesis H0 of equality of means between the three groups of the firms (taken two by two).
This means that the extent of voluntary disclosure doesnt significantly vary across the three
observed years. But it should be noted that the extent of voluntary disclosure is more
important for the year 2005 compared to the year of 2003 (26,25 > 20,5 and 26,20 > 20,54 ;
sig=14% and 15%).
5.2.
5.2.1.
Negative ranks
Positive ranks
-4,354
0,000
17
N
14
53
Mean rank
31,57
34,64
The table 3 shows that there are few differences between weighted IDIV and
unweighted IDIV. In spite of that, we found a significant difference (at 1%) between the two
measures of the voluntary disclosure index, which means that financial analysts give a
different interest to voluntary disclosed items in annual reports. This result corroborates with
the results of the study of Naser and Nuseibeh (2003), but it is contradictory with the results
of the study of Chow and Wong-Boren (1987). It should be noted that the coefficient of
correlation between the weighted IDIV and unweighted IDIV is 0.99 and is significant at 1%.
It is suitable then to use the weighted IDIV variable in our multivariate analysis.
5.2.2.
Mean
Median
Std Dev
67
67
66
66
66
66
37,59
19,33
2,09
20,60
59,17
1,31
35
9,6
2,19
14,28
61,8
0,19
18,01
22,87
0,26
22,65
20,03
1
68
69
68
68
N
67
84,57
72,79
119,28
1,86
1,94
0,73
199,50
123,45
394,20
17,90
17,77
0,98
Variable = 1
Variable = 0
Median
19
48
0
(28,35%)
(71,64%)
66
48
18
1
DUAL
(72,72%)
(27,27%)
69
28
41
0
QAU
(40,57%)
(59,42%)
IGOUV= factor of variables (ICA. TCA et PADM). CONC = percentage of shares held by the dominant
shareholder. PINST= percentage of shares held by institutional investors. FAM=1 when the firm is controlled by
a family and =0 otherwise. ICA = number of external directors / number of directors. LNTCA = Log (number of
directors). DUAL =1 if one person holds at the same time the functions of CEO and chairman of the board and
=0 otherwise. PADM = percentage of shares held by directors. INTCAP = gross fixed assets / total assets. LNTA
= Log (total assets). END = total debts / equity. LNCOT = Log (duration of the listing of the firm in the stock
exchange in years). QAU=1 if the firm is audited by a big 4 and = 0 otherwise.
This table shows that the firms of our sample are characterizes by a high ownership
concentration (the minimum of this variable is equal to 11%) and especially by a very high
managerial ownership. The firms investigated are highly indebted and have a capitalistic
intensity. The standard deviation of the variables PINST and ICA are very important
comparing to the means, which demonstrates the existence of a high disparity between the
firms of our sample. This result justifies the use of panel data to control the heterogeneity of
the observation in their individual dimensions.
5.2.3.
Correlation analysis
The matrix of correlation of Spearman doesnt show any correlation higher than 0.6
between the independent variables. We have also calculated the VIF. It is under the threshold
of 3 for all the independent variables, but it exceeds the value of 2 for the following
variables: CONC, PADM, DUAL and ICA. From where there is a very little problem of
mutlicolinearity in our Model 1. It is then suitable to replace the variables (ICA, TCA and
PADM) by the variable IGOUV (already defined) in our Model 2 to avoid any source of
multicolinearity.
18
5.3.
Fisher test
Model 2
6,09***
(0,0000)
The results of this test allow to reject the null hypothesis H0 and to accept the
alternative hypothesis: the presence of individual effects.
5.3.2.
Test of Hausman
Chi-2 test
Model 2
7,80
(0,5543)
We have, also, used the test of Hausman in order to specify the model whether by
taking into consideration the individual fixed or random effect. The Hausman test is not
significant for the Model 1 and for the Model 2, thus, we apply the specification in random
effects.
5.3.3.
Heteroscedasticity test
Table 8: Test of Breusch-Pagan
Model 1
5,67**
(0,0173)
** significant at 5%
Chi-2 test
Model 2
5,80**
(0,0160)
Breush-Pagan test have confirmed the existence of heteroscedasticity problem for both
Model 1 and Model 2. Thus, we use the method of GLM (generalized least squares) that takes
into consideration the presence of heteroscedasticity.
5.4.
5.4.1.
Variables
Intercept
ICA
LNTCA
DUAL
PADM
CONC
PINST
FAM
INTCAP
LNTA
QAU
LNCOT
Results of Model 1
Table 9: Results of Model 1
Pred sign
?
+
-/+
+
+
+
+
+
Coefficients
60,70278***
-0,1899977***
-5,982983
-10,13566***
0,1491854**
0,1306006
0,0197181
-5,229894**
-0,0250128*
-0,2370524
1,574098
-2,237565
19
IDIV weighted
3,03
-3,03
-1,60
-3,29
2,00
1,33
0,31
-2,26
-1,74
-0,20
0,50
-1,16
z-statistic
0,0023512
0,86
END
+
64
N
-222,7307
Log likelihood
61,53***
Wald Chi-2
0,0000
Prob > Chi-2
*, ** et *** significant at 10%, 5% et 1% respectively
IDIV= index of voluntary disclosure. CONC = percentage of shares held by the dominant shareholder. PINST=
percentage of shares held by institutional investors. FAM=1 when the firm is controlled by a family and =0
otherwise. ICA = number of external directors / number of directors. LNTCA = Log (number of directors).
DUAL =1 if one person holds at the same time the functions of CEO and chairman of the board and =0
otherwise. PADM = percentage of shares held by directors. INTCAP = gross fixed assets / total assets. LNTA =
Log (total assets). END = total debts / equity. LNCOT = Log (duration of the listing of the firm in the stock
exchange in years). QAU=1 if the firm is audited by a big 4 and = 0 otherwise.
The negative and statistically significant coefficient of the variable ICA highlights the
fact that when the percentage of external directors in the board increases by 10%, the extent of
voluntary disclosure decreases by 18.99%. Thus, our hypothesis H1.1 is confirmed. This
result corroborates with the study of Bouri and Khlifi (2007) who found that when the
percentage of independent members in the board of directors increases by 10%, the level of
voluntary disclosure decreases by 47.4%. The studies of Eng and Mak (2003) and of Barako
and al. (2006) also highlight the existence of a negative relation between the percentage of
external directors and the extent of voluntary disclosure. Nevertheless, this result, that is not
logical, can be explained by the choice of the measure used for the variable ICA. Its probable
that the used criterion is not sufficient to qualify an external director. But the use of these
chosen criteria is justified by the lack of data about the identity of the directors of the Tunisian
firms. This result can also be explained by the effect of substitution between voluntary
disclosure and the proportion of external directors. A good voluntary disclosure can replace
the absence or the lack of external directors. The inverse reasoning is also valid. The presence
of external directors can take the place of voluntary disclosure.
The link between voluntary disclosure and the size of the board is not significant. This
makes us confirm our hypothesis H1.2. This result is coherent with the results of Lakhal
(2003) and of Arcay and Vzquez (2005).
Our result for the variable DUAL corroborates with the results of Gul and Leung
(2004), but its in contradiction with the results of Ho and Wong (2001), of Arcay and
Vzquez (2005), of Raffournier (1995) and of Barako and al. (2006) that reveal a negative but
not significant relation between the extent of voluntary disclosure and the existence of a
dominant personality (that holds the functions of CEO and chairman of the board). Our results
lead us to confirm the hypothesis H1.3 and thus to highlight the fact that the structure of the
leadership of the board of directors negatively influence the extent of voluntary disclosure.
The coefficient of the variable PADM is significant and its sign is contrary to the
expected sign. This result is not coherent with the results of Eng and Mak (2003), of Mohd
Ghazali and Weetman (2006), of Siala Ghorbel (2005) and of Trabelsi and al. (2005) and
makes us infirm our hypothesis H1.4 and to affirm that more the managerial ownership
increases, more the voluntary disclosure extent increases.
For the variable CONC, its coefficient is positive (contrary to the expected sign) and
not significant which make us infirm the hypothesis H2.1. This result joins the results of the
studies of Loukil and Triki (2008) and of Bouri and Khlifi (2007), conducted in the Tunisian
context using cross sectional data. This positive relation we have found can be explained by
the fact that when the capital is highly concentrated, the problems of interests conflicts
between small shareholders and large shareholders dont push the latter to minimize voluntary
disclosure. The measure we used may not be suitable for our context of research.
20
As far as the variable PINST is concerned, its coefficient is positive and not
significant, which infirm the hypothesis H2.2. This result doesnt corroborate with the results
of Trabelsi and al. (2005) and of Ajinkya and al. (2005).
The coefficient of the variable FAM is negative as expected and is significant, which
confirm the hypothesis H2.3 and corroborate the results of Chau and Gray (2002) and of
Trabelsi and al. (2005). This means that the family controlled firms disclose less than the
other firms.
The control variables have not significant coefficients except for capitalistic
intensity variable. Its negative sign makes us affirm that when the entry barriers of the
sectors are important, the extent of voluntary disclosure is weak. But, what attracts our
attention, is the fact that our results show that the size of the firm has a negative but non
significant effect on the extent of voluntary disclosure. This result is matching to neither the
sign nor the results of previous empirical evidences of Buzby (1975), of Chow and Wong
(1987), of Ho and Wong (2001) and of Raffournier (1995).
5.4.2.
Variables
Results of Model 2
Table 10: Results of Model 2
Pred sign
IDIV weighted
Coefficients
z-statistic
79,85696***
3,74
Intercept
?
4,250724***
4,88
IGOUV
+
-7,418199**
-2,38
DUAL
0,1190179
1,49
CONC
0,0166937
0,28
PINST
+
-5,235595**
-2,33
FAM
-0,0165384
-1,20
INTCAP
+
-1,580097
-1,30
LNTA
+
3,064574
1,19
QAU
+
-4,84571***
-2,72
LNCOT
+
0,001728
0,60
END
+
64
N
-225,0055
Log likelihood
41,78***
Wald Chi-2
0,0000
Prob > Chi-2
*, ** et *** significant at 10%, 5% et 1% respectively
IDIV= index of voluntary disclosure. IGOUV= factor of variables (ICA. TCA et PADM). CONC = percentage
of shares held by the dominant shareholder. PINST= percentage of shares held by institutional investors.
FAM=1 when the enterprise is controlled by a family and =0 otherwise. DUAL =1 if one person holds at the
same time the functions of CEO and chairman of the board and =0 otherwise. INTCAP = gross fixed assets /
total assets. LNTA = Log (total assets). END = total debts / equity. LNCOT = Log (duration of the listing of the
firm in the stock exchange in years). QAU=1 if the firm is audited by a big 4 and = 0 otherwise.
The coefficient of the variable IGOUV is significant and its sign is positive. This
means that the quality of corporate governance influence significantly the extent of voluntary
disclosure. This result allow us confirm our hypothesis H 1. This result is logical because
disclosure is an integral part of the corporate governance system. A good quality of corporate
governance allow then to improve the extent of voluntary disclosure that is considered as a
mean to control the managers, to protect the shareholders and to decrease agency costs
resulting from information asymmetry.
We found that the coefficient of the variable LNCOT is significant but doesnt have
the expected sign. This makes us confirm the fact that the firms recently listed in the Tunisian
stock exchange voluntary disclose more than old firms. The new firms in the market disclose
more than the others in objective of signaling.
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5.5.
Tests of the mediator effect of the composition of the board of directors on the
influence of the ownership concentration o voluntary disclosure
In what follows, we apply the regression approach (simple and multivariate) and we
test the four conditions enunciated by Caceres and Vanhamme (2003) in addition to the
specific tests of the panel data.
Table11: First step of the test of the mediator effect
Estimated Equation: IDIV weighted it = 0 + 1 CONC it + ait
Variables
Pred Sign
Coefficients
z-statistic
37,23247***
15,06
Intercept
?
0,0613336
0,96
CONC
65
N
7,08***
Test of Chow
0,0000
Prob > Fisher
3,80*
Test of Hausman
0,0514
Prob > Chi-2
22,45***
Test of Breusch-Pagan
0,0000
Prob > Chi-2
-240,8149
Log likelihood
0,92
Wald Chi-2
0,3375
Prob > Chi-2
*, ** et *** significant at 10%, 5% et 1% respectively
IDIV= index of voluntary disclosure. CONC = percentage of shares held by the dominant shareholder.
We find that the relation between the ownership concentration and the voluntary
disclosure is positive and statistically significant. Thus, our first condition is not verified since
the coefficient of the variable CONC is not significant.
Since our first condition is not verified, it is useless to verify the conditions 2, 3 and 4
of the existence of a mediator effect. We cant thus confirm the existence of the mediator
effect of the composition of the board of directors on the relation between the concentration of
ownership and voluntary disclosure. This result doesnt match with the study of Arcay and
Vzquez (2005) and then our hypothesis H 3 is infirmed.
6. Conclusion
The major interest of this study is that it contributes to the analysis of the behaviors of
the Tunisian firms in matter of voluntary disclosure in annual reports and the examination of
the effects of the board composition and the ownership structure on voluntary disclosure. The
institutional setting of Tunisia is of interest because it is characterized by its high ownership
concentration, low level of investor protection and poorly developed capital market.
The results of our study highlight that the extent of voluntary disclosure tends to
improve through the time. According to the used statistic tests, we have proved that the
independence of the structure of the leadership of the board of directors and the family
ownership dont improve the extent of voluntary disclosure. We have demonstrated, in the
other hand, that the size of the board of directors has no effect on the extent of disclosure.
Nevertheless, we find that managerial ownership and the quality of corporate governance are
represented as incentive factors to corporate voluntary disclosure.
This study has both theoretical and practical implications. From a theoretical
standpoint, our analysis reveals a positive relationship between the two control mechanisms
(i.e. board composition and voluntary disclosure). From a practical standpoint, the study
offers insights to policy makers and regulators in order to evaluate the effectiveness of
corporate governance rules and the interaction between control systems.
However, our study has certain limits. The most important are its small sample and the
manual analysis of the content of the annual reports. It is convenient, also to conceive an
index of voluntary disclosure prepared according to the needs of the Tunisian annual reports
22
users instead of using the modified index of Botoson (1997). The use of the classic factorial
analysis for the construction of a governance index is also questionable: the non linear
factorial analysis allows us include qualitative variables such as the structure of the leadership
of the board. Also, the lack of publicly available information on Tunisian listed companies
limited to some extent our empirical research. This lack of data stopped us from refining
measures of variables.
Core (2001), Lim and al. (2007), Gul and Leung (2004), Cheng and Courtenay (2006)
and Nikolaev and Van Lent (2005) affirm that the endogeneity problem embarrasses most of
the empirical studies that treat voluntary disclosure. Therefore, it is important to examine the
problem related to the endogenous nature of the quality of corporate governance through the
verification of the existence of a bi-directional relation between the quality of corporate
governance and the extent of voluntary disclosure.
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