Association between Ownership Structure and Public Announcements' Disclosures

In: Corporate governance: an international review, Band 17, Heft 1, S. 13-34

Abstract

ABSTRACTManuscript Type: EmpiricalResearch Question/Issue: The impact of ownership structure on annual report disclosures and overall disclosure quality has received some attention in previous literature, but no study has examined it in the context of public announcements. This paper investigates the issue by using a disclosure score based on six disclosure quality attributes and by employing two quantitative disclosure measures in the context of three European emerging capital markets in the Baltics – the Tallinn, Riga, and Vilnius Stock Exchanges.Research Findings/Results: In line with expectations, public announcement disclosure quality had a negative association with ownership concentration and foreign ownership and a positive association with institutional ownership. In terms of other company characteristics, sales growth and size of entry barriers exhibited positive associations with disclosure as expected. Unlike in previous research, statistically significant negative associations between size and announcement length were supported. This is due to the sample used, which included several firms from the Vilnius Stock Exchange with short announcements for the pre‐2003 period.Theoretical Implications: This paper presents possibilities for employing information theory in the context of finance for determining possible disclosure quality attributes that could be used in the creation of a disclosure quality score.Practical Implications: Empirical tests reveal the importance of ownership structure in determining the disclosure choice of companies that, in turn, may provide information about the types of companies that need more effective regulative enforcement.