Corporate Board Governance and Voluntary Disclosure of Executive Compensation Practices*
Year: 2008
Type: article
Abstract: This study examines how corporate boards respond to investor demands for information on executive compensation practices and whether certain board and compensation committee characteristics, as proxies for board governance quality, are associated with the extent of board disclosure of compensation practices. A unique feature of this study is the development of a comprehensive checklist of 23 compensation-related items. I validate this index by showing that the disclosure scores are inversely related to two measures of information asymmetry: bid-ask spread and return volatility. This provides evidence that greater compensation disclosure reduces information asymmetry. The study presents some evidence that boards with the power to act independently from management provide more details about executive compensation practices. Moreover, it contributes to the literature on corporate governance and disclosure by showing that greater commitment of directors to perform their duties results in greater transparency.
Source: Contemporary Accounting Research
DOI: 10.1506/car.25.4.8
Author: Indrarini Laksmana
Institution: Kent State University
Language: English
Subfield: Accounting
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W3124457484