What determines the disclosure of managerial remuneration in India?

Abstract

Purpose

This study aims to analyse the impact of company performance, company size, ownership structure, board characteristics and other company characteristics on the disclosure of managerial remuneration in 134 listed companies in India from the year 2003 to 2012.

Design/methodology/approach

A disclosure and compliance index is developed on the basis of 14 statements prepared regarding the disclosure of managerial remuneration in corporate governance reports of companies. The Papke and Wooldridge (2008) approach is adopted to estimate fractional response models, and fractional probit model is estimated using the generalised estimating equation approach, with an independent working correlation matrix to determine the effect of various company attributes on managerial remuneration disclosure.

Findings

The study shows that company size and the presence of remuneration committee are significantly related with the disclosure and compliance index of managerial remuneration. Remuneration disclosure is found to be time-dependent as time dummies for all years are found to be significant.

Research limitations/implications

This study highlights the importance of the formation of remuneration committees on corporate boards. The findings of the present study can be used as inputs for promoting better compliance and comprehensive executive remuneration disclosure.

Originality/value

Nothing concrete in the field of managerial remuneration disclosure (to the best of researcher’s knowledge) has yet been done in an emerging economy such as India. This study aims to address this gap by deriving a disclosure and compliance index for managerial remuneration disclosure and examining the impact of various corporate attributes on it.

Citation

Kang, L.S. and Nanda, P. (2018), "What determines the disclosure of managerial remuneration in India?", Journal of Financial Reporting and Accounting, Vol. 16 No. 1, pp. 2-23. https://doi.org/10.1108/JFRA-04-2015-0050