Board composition and credible voluntary disclosures

This study investigates whether the extent of management voluntary disclosure is viewed as credible by the investors and whether board composition has any influence on the credibility of such disclosure. The research approach involves content analysis of annual reports of 155 Malaysian companies for the year 2002. Regression analyses reveal that the extent of voluntary disclosures does not give sufficient confidence to outside investors and as such does not reflect management´s incentives to disclose value relevant information about their companies´ current and future earnings. Instead, it indicates that under the influence of controlling owners, independent non-executive directors support these owners in influencing managers to disclose voluntary information for legitimacy purposes. This study advances knowledge on management disclosure behavior in particular agency settings.