Disclosure by Indian companies following corporate governance reform
Abstract
Purpose
The purpose of this paper is to investigate Indian companies’ compliance with the mandatory and voluntary corporate governance disclosure requirements of the Stock Exchange Board of India’s Clause 49.
Design/methodology/approach
The authors develop a corporate governance disclosure index and sub-indices based on Clause 49. Annual reports of listed Indian companies are scored according to their disclosures in two periods – pre and post amendments to Clause 49.
Findings
Indian companies are highly compliant with corporate governance disclosure requirements of Clause 49. Disclosure increases significantly after amendments to Clause 49 as the penalties for non-compliance increase in severity. Government controlled firms disclose significantly less than privately owned firms.
Research limitations/implications
The findings are consistent with bonding theory and the authors note that the presence of an independent regulator (with powers to take action against violators) provides corporate India with additional incentives to comply with corporate governance reform.
Practical implications
These findings have important implications for policy makers and regulators as they contribute to the debate on the choice between formal corporate governance regulation versus informal self-regulation. The study also has implications for understanding factors associated with the adoption of disclosure practices in general.
Originality/value
This is the first study to examine disclosure compliance in a major developing country pre and post amendments to mandatory corporate governance requirements. Prior evidence indicates a low level of disclosure in India but our results demonstrate an improvement in line with our theoretical predictions that suggests, India is converging towards an Anglo-Saxon model of corporate governance.
Keywords
Acknowledgements
The authors are grateful to Standard and Poor for providing us with the Standard and Poor’s India Governance Index data.
Citation
Abraham, S., Marston, C. and Jones, E. (2015), "Disclosure by Indian companies following corporate governance reform", Journal of Applied Accounting Research, Vol. 16 No. 1, pp. 114-137. https://doi.org/10.1108/JAAR-05-2012-0042
Publisher
:Emerald Group Publishing Limited
Copyright © 2015, Emerald Group Publishing Limited