Disclosure Index

The study examines the impact of corporate governance practices on the level of financial disclosures made by the Indian firms. This assumes importance in the context of the role of financial disclosures in addressing the agency problem.
Financial disclosure score is computed by considering disclosures provided by the generally accepted accounting principles and is our dependent variable. Our independent variable - corporate governance score is an index comprising of external governance mechanisms. We empirically examine the impact of corporate governance practices on financial disclosure using multiple regression model for 200 large listed Indian firms. The study suggests that quality of governance practices significantly improves financial disclosure practices of the firm. Particularly, the composition of audit committee is effective in improving disclosures.
The finding has implications for policy makers and practitioners. It will help investors, lenders and other stakeholders to assess firms’ financial disclosure quality. In addition, the findings, suggest the influence of governance practices on disclosure, might help in the formulation of appropriate policies about board structure and audit function. It is also a call to investors to emphasize on governance quality of the investing firms.The study builds a case for an urgent intervention for improvising the existing governance standards to improve the quality of financial disclosure in an emerging market context.

Keywords: Corporate Governance, Financial Disclosure, Financial Reporting, Disclosure Index, Corporate Governance Index