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Managerial Ownership, Corporate Governance and Voluntary Disclosure

December 28, 2005

H. Young Baek *

H. Wayne Huizenga School of Business and En re!reneurshi! "o#a Sou heas ern $ni#ersi y

%%0& 'ollege (#enue

)or *auderdale, )* %%%&+hone- 5+/2 2/5&0%)a1- 5+/252/++55

E/mail- hybae 3no#a.edu

Darlene R. JohnsonH. Wayne Huizenga School of Business and En re!reneurshi!

"o#a Sou heas ern $ni#ersi yhone- 5 &/4+8/88 5

E/mail- hdarlene3!rofessor ohnson.org

Joung W. KimDe!ar men of (ccoun ancy

6ohn 7olson School of Business'oncordia $ni#ersi y

hone- 5&+ 8+8/2+2+ E1 . 24 0E/mail- im3 msb.concordia.ca

Please do not quote this preliminary study without authors written permission.Comments are welcome.

9 'orres!onding au hor

&
mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]

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ABSTRACT

'or!ora e go#ernance in#ol#es many differen y!es of ac i#i ies ha can reduceagency cos s. :his s udy finds ha managerial o;nershi! le#els affec he le#eland y!e of discre ionary disclosure a firm engages in and ha o her y!es of

cor!ora e go#ernance mechanisms in !lace also affec he le#el and y!e ofdiscre ionary disclosure sugges ing a com!le1 and in erac ing cor!ora ego#ernance s ruc ure. :his s udy finds a nega i#e rela ionshi! be ;een he le#el ofmanagerial o;nershi! and he le#el of discre ionary disclosure for firms ;i h lo;le#els of managerial o;nershi!. o &2> are more li ely o disclose o;nershi!s ruc ure and in#es or rela ions informa ion.

ey !ords"discre ionary disclosure, managerial o;nershi!, e1ecu i#e com!ensa ion, bloc o;nershi!,

ins i u ional o;nershi!, ou side direc ors, cor!ora e con rol, cor!ora e go#ernance, agency heory

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Discre ionary disclosure is im!or an o he cor!ora e go#ernance !rocess.

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con rol of he firm, ;hich can crea e a di#ergence of in eres s be ;een he o;ners and he

managemen ?Berle and 7eans, & %2 . When shareholders delega e he decision ma ing

au hori y o managemen , his crea es an agency rela ionshi!.

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agency !roblem, 2 associa ion/based solu ions ;here he !rinci!al influences ac ions o reduce

he agency !roblems also called cor!ora e go#ernance, and % efficiency/based solu ions ;here

he com!e i i#e ca!i al mar e crea es na urally occurring solu ions ? errecchia, 200& . While

cor!ora e go#ernance, ;hich falls under associa ion/based disclosure, e1amines he ac ions ha

he !rinci!alFin#es ors or hird !ar ies ;or ing he !rinci!alAs in eres can a e o hel! mi iga e

he agency !roblem ?Healy and ale!u, 200& , discre ionary/based disclosure e1amines he ;ay

ha agen s or managemen can ;or o sol#e he agency !roblem. )ree mar e or efficiency/

based solu ions are solu ions o he mar e ha na urally occur due o he com!e i i#e na ure of

he ca!i al and labor mar e ;hen managemen does no ;or o fulfill heir obliga ions. )igure& illus ra es he rela ionshi! be ;een he hree y!es of solu ions o he agency !roblem.

GGGGG

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gi#ing mar e !ar ici!an s a be er abili y o dis inguish higher ris firms ?or lemons from firms

ha are fundamen ally safe and sound ?'arse, 200& .

:heore ical discre ionary disclosure research !ro#ides a model of disclosure ;here

managers ;i h su!erior no;ledge on firm !erformance can im!ar heir no;ledge o ou side

in#es ors o reduce informa ion asymme ry reducing ca!i al cos s ? errecchia & 8%, Diamond

and errecchia & &, Kim and errecchia 200&, Healy and ale!u & %, Jhang 200& .

Em!irical research seems o su!!or his #ie; ;i h increased disclosure leading o a decrease in

bid/as s!read ?Wel er, & 5 , increased analys follo;ing ?*ang and *undholm, & ,

increase in s oc li=uidi y, s oc !erformance, ins i u ional o;nershi! and analys s ?Healy e al.,& , lo;er bid/as s!reads and increase in rading #olume ?*euz and errecchia, 2000 , lo;er

cos of deb ?Sengu! a, & 8 , and lo;er cos of e=ui y ?Bo osan & 4, Bo osan and lumlee

2000, Bo osan and lumlee 2002 .

Ho;e#er, ano her #ie; of discre ionary disclosure is signaling. Similar o ob a!!lican s

ha in#es in educa ion o signal o em!loyers heir dis inc ion ?S!ence, & 4% , cor!ora e

managers may use discre ionary disclosure o sho; in#es ors hey are ac i#ely ;or ing o sol#e

agency !roblems. @elb and S ra;er ?200& find ha socially res!onsible firms under a e

increased disclosure !olicies and feel ha i is a form of socially res!onsible beha#ior. :his #ie;

of discre ionary disclosure is also su!!or ed by Warfield, Wild and Wild ?& 5 .

Managerial Ownership

6ensen and 7ec ling ?& 4 !osi ha firms ;i h higher le#els of managerial o;nershi!

align he in eres of managers and shareholders, lo;ering agency cos s and increasing firm #alue.

S ulz ?& 88 ho;e#er !ro#ides a model of firm #alue ha firs increases as inside managerial

o;nershi! increases, and hen decreases as inside managerial o;nershi! becomes concen ra ed

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since high managerial o;nershi! ser#es as insula ion from e1 ernal a eo#ers resul ing in

managemen en renchmen . ( erlof ?& 40 , S!ence ?& 4% and *eland and yle ?& 44 !ro#ide a

com!limen ary model of agency heory ;here managemen uses managerial o;nershi! as a

signal o ou side in#es ors of heir firms =uali y. S udies on he rela ionshi! be ;een firm #alue

and he le#el of managerial o;nershi! ha#e been mi1ed. Demse z and *ehn ?& 85 and Hermalin

and Weisbach ?& & find no rela ionshi! be ;een he le#el of managerial o;nershi! and

!rofi abili y. 7orc , Shleifer, and ishny ?& 88 , 7c'onnell and Ser#aes ?& 0, & 5 , and

'hen, He1 er and Hu ?& % all find su!!or for S ulzAs nonmono onic rela ionshi! . 7orc k et al.

?& 88 find a !osi i#e rela ionshi! be ;een managerial o;nershi! and firm #alue measured by:obinAs = be ;een 0> and 5> and beyond 25> o;nershi!, bu a nega i#e rela ionshi! be ;een

5> o 25>. 7c'onnell and Ser#aes ?& 0 find a !osi i#e rela ionshi! u! +0> o 50> of

managerial o;nershi!, and hen a nega i#e rela ionshi! beyond 50>. 'hen, He1 er and Hu

?& % ho;e#er find ha firm #alue rises ;hen managemen o;nershi! is be ;een 0> and 5/

4>, and hen decreases as inside managemen o;nershi! rises abo#e &2>.

7ehran ?& 5 , (ng, 'ole and *in ?2000 , Singh and Da#idson ?200% find su!!or for

6ensen and 7ec lingAs #ie; of inside managerial o;nershi!. 7ehran ?& 5 finds a !osi i#e

linear rela ionshi! be ;een o! managemen o;nershi! and :obinAs L. (ng, 'ole and *in

?2000 and Singh and Da#idson ?200% find ha as managerial o;nershi! increases agency cos s

decreases, using asse u iliza ion as a !ro1y. :here is also a rela ionshi! be ;een he le#el of

managerial o;nershi! and firm s ra egy ?(mihud and *e# & , (mihud, *e# and :ra#los & 0,

Denis, Denis and Sarin & . We e1!and u!on his #ie; o e1!lore he rela ionshi! be ;een he

le#el of managerial o;nershi! and a firmAs disclosure !olicy, by e1amining ho; he le#el of

managerial o;nershi! affec s he le#el and y!e of discre ionary disclosure.

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E ecuti!e Compensation

E=ui y/based e1ecu i#e com!ensa ion !lans hel! mi iga e he agency !roblem by

re;arding managers based on he financial re urn of in#es ors ?Kerr and Be is, & 84 . :his y!e

of con rac ing mechanism ;or s o align bo h managers and in#es ors in eres s ?Healy and

ale!u, & % and !ro#ides managers a means o signal heir dis inc ion and con#ic ion in heir

o;n abili y o manage. While some researchers find ha !ay/for/!erformance com!ensa ion

!lans add o firm #alue ?7ur!hy & 85, 6ensen and 7ur!hy & 0, 7ehran & 5 , o hers find no

similar su!!or from da a ?7orc e al., & 88 . Har#ey and Shrie#es ?200& find ha firms ha

ha#e a board of direc ors ;i h a higher !ercen age of ou side direc ors and larger blocs oc holders use e1ecu i#e incen i#e com!ensa ion more fre=uen ly. :his sugges s ha here is a

rela ionshi! be ;een e1ecu i#e com!ensa ion and he y!es of cor!ora e go#ernance mechanisms

used in firms.

Association*Based + rincipal Driven- Actions

Monitoring by the "oard o# Directors

:he boardAs abili y o moni or managemen !ro#ides an addi ional cor!ora e go#ernance

mechanism for he firm. Mne of he mos im!or an roles !layed by a firmAs board of direc ors is

o#ersigh and con rol of managemen for in#es ors ?)ama, & 80 . While he direc ors are elec ed

by he shareholders, managemen !lays a significan role in he selec ion of i s direc ors.

Iesearch finds significan !osi i#e share/!rice reac ions ;hen ou side direc ors are a!!oin ed o

he board ?Iosens ein and Wya , & 0 . S rong broad charac eris ics including board size, ra io

of ou siders o insiders, o;nershi! !osi ions of board members, and leadershi! hel! mi iga e he

agency !roblem ?Ho; on, Ho; on and Mlson, 200& . :hese charac eris ics of board indirec ly

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measure he inde!endence of boards from he managemen of firms ?Dal on, Daily, 6ohnson and

Ells rand, & . Ho;e#er, some research finds a nega i#e rela ionshi! be ;een a larger ou side

re!resen a ion on he board and firm !erformance ?(gra;al and Knoeber, & . M hers find no

rela ionshi! be ;een board ma e/u! and firm !erformance ?Dal on, Daily, 6ohnson and Ells rand

& , Singh and

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e#idence o su!!or his heory. Bushee and "oe ?2000 find ha ins i u ional o;nershi! is

a rac ed o he firms ;i h higher disclosure le#els, bu hese y!es of ins i u ional o;ners are

shor / erm in#es ors, no long/ erm moni oring in#es ors.

&))iciency*Based +Mar.et Driven- Actions

$oss o# Corporate Control

6ensen and Iubac ?& 8% heorize ha increased le#els of cor!ora e con rol ;here

managers ha#e o com!e e for he righ o manage a firm should increase firm !erformance.

Ho;e#er, (gra;al and Knoeber ?& find a nega i#e rela ionshi! be ;een firm !erformanceand he mar e for cor!ora e con rol sugges ing ha !oor !erformance may lead o increased

a eo#er ac i#i y. We e1amine he le#el of cor!ora e con rol as a mechanism for mi iga ing

agency cos s.

##$ DATA A(D M&T%ODO/OG'

Sa0ple and Data Sources

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Discre ionary disclosure da a comes from he S andard and oorAs :rans!arency and

Disclosure ;orld ;ide sur#ey of &, 00 firms on ac ual disclosure ac i#i ies. Durne# and Kim

?200% find ha he S andard N oorAs global ran ings !osi i#ely correla e ;i h he cor!ora e

go#ernance scores com!iled by 'redi *yonnais Securi ies (sia adding credi abili y o he

reliabili y of he S andard and oorAs scores. :he S andard and oorAs sur#ey co#ers he

inclusion of 8 differen disclosure a ribu es based on ;ha is disclosed in a firmAs annual

re!or s and s andard regula ory filings in he cor!ora e year 2000. Each a ribu e is e#alua ed on

a binary basis ;i h one !oin gi#en for each disclosure a ribu e ha is !resen based a on OyesA

?included ans;er in he sur#ey. :he com!le e =ues ionnaire can be re=ues ed from he au hors.:he da a is sub/ca egorized in o hree ey areas of discre ionary disclosure ac i#i ies- &

M;nershi! s ruc ure and in#es or rela ions, 2 financial rans!arency and informa ion disclosure

and % board and managemen s ruc ure and !rocesses. :he firs area of o;nershi! s ruc ure and

in#es or rela ions is based on 28 =ues ions in he sur#ey, and includes =ues ions such as-

Does he com!any in i s annual accoun s disclose he number of issued and

ou s anding shares disclosedP Does he com!any in i s annual accoun s disclose he number and iden i y ofshareholders holding more han %>P

Does he com!any in i s annual accoun disclose he o! &0 shareholdersP Does he com!any in i s annual accoun s disclose 'or!ora e @o#ernance 'har er

or 'ode of Bes rac icesP

:he second area is financial rans!arency and informa ion disclosure. :his includes %5

=ues ions such as-

Does he com!any in i s annual accoun s disclose a de ailed earnings forecas P Does he com!any in i s annual accoun s disclose a segmen analysis ?bro en

do;n by business line P Does he com!any in i s annual accoun s disclose he o;nershi! s ruc ure of i s

affilia esP

&&

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:he hird area of rans!arency is board and managemen s ruc ure and !rocess. :here are

%5 =ues ions on his area ;i h =ues ions such as-

Does he com!any in i s annual accoun s disclose a lis of board members namesP Does he com!any in i s annual accoun s disclose classifica ion of direc ors as an

e1ecu i#e or an ou side direc orP Does he com!any in i s annual accoun s disclose he s!ecifics on !erformance/

rela ed !ay for managersP

)irm !erformance is measured by mar e o boo ra io using S andard and oorAs

'M7 $S:(:.

&sset '

( =

Where Q EL$

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&58 firms ha ;ere delis ed in his four year !eriod, &20 firms from % differen ;o digi

indus ries ;ere delis ed due o merger or ac=uisi ion.

We crea ed ;o dummy #ariables o con rol for differences in he regula ory en#ironmen

similar o he ;or done by (gra;al and Knoeber ?& and ale!u ?& 8 . IE@$ re!resen s a

firm is a railroad or !ublic u ili y ?i.e., 2/digi S

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labeled as H 2o, H 2a, H %o, H %a, H +o and H +a, res!ec i#ely. Hy!o heses are es ed using he follo;ing

regression model-

t

t

)%*E PE+, DE"- +E., +E./

CO+P %0)- "$OC1 OD%+ E2COMP O30 D%)C

+++++

+++++++=

&&&084

5+%2&0

;here MW" Q *e#el of 7anagerial M;nershi!,ET'M7 Q *e#el of E1ecu i#e 'om!ensa ion,MD and a median le#el of &.0+>, his can

be e1!lain by our sam!le selec ion. Mne of he re=uiremen s for a firm in he SN 500 is hey

mus ha#e a !ublic floa of a leas 50>. rior research on )or une 500 sized com!anies included

&+

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managerial o;nershi! le#els ha are in e1cess of 50>, and our SN 500 firms by defini ion

ha#e lo;er le#els of managerial o;nershi!.

While (gra;al and Knoeber ?& found an a#erage mar e o boo #alue of &.&+

?median Q 0. % , ;e found ha our a#erage mar e o boo #alue ;as 2.+4 ;i h a median of

&.+ . :his difference in mar e o boo #alue may be due o our sam!le selec ion oo. While

(gra;al and KnoeberAs research ;as based on +00 large $.S. firms, SN 500 inde1 re=uires

financial #iabili y de ermined by four consecu i#e =uar ers of !osi i#e earnings. :his re=uiremen

may e1!lain he higher !rofi abili y of our sam!le selec ion.

GGGGG

HigherC ;i h managerial o;nershi! le#el be ;een &.8> and 4.0> 7ediumC be ;een .5> and

&.8> *o;C be ;een .00&> and .5> and "oneC re!resen s less han .00&> of managerial

o;nershi!. E1amining hese descri! i#e s a is ics, ;e no e ha firms ;i h managemen

o;nershi! le#els belo; .5> ha#e higher Oo#erallA, Oo;nershi!A and Oboard and managemen

!rocessA disclosure scores han firms in he o! hree grou!s, on a#erage. :his a!!ears o su!!or

our hy!o hesis ha firms ;i h higher agency cos s, i.e., firms ;i h lo;er le#els of managerial

o;nershi!, increase heir use of discre ionary disclosure o hel! reduce agency cos s.

GGGGG

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correla ion be ;een o;nershi! and Oo;nershi! s ruc ure and in#es or rela ionsA disclosure or

be ;een o;nershi! and Ofinancial rans!arency and informa ionA disclosure. :he selec i#e

correla ions be ;een differen y!es of disclosure and managerial o;nershi! sugges ha he

le#el of managerial o;nershi! has an influence on ;ha y!es of informa ion are disclosed as

;ell as ho; much.

GGGGG

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;i h financial rans!arency and informa ion disclosure score. Mnce again he le#el of managerial

o;nershi! is no rela ed ;i h OfinancialA disclosure score.

)inal regression of managemen and board !rocesses disclosure sho;s ha he le#el of

managerial o;nershi! does ha#e a significan nega i#e rela ionshi! ;i h Omanagemen !rocessA

disclosure score ?! #alue Q .022 . ercen age of ou side direc ors is !osi i#ely rela ed o o#erall

Omanagemen !rocessA disclosure score, bu here is a significan nega i#e rela ionshi! be ;een

bloc o;nershi! and Omanagemen !rocessA disclosure ?! #alue Q .0&2 .

GGGGG of o;nershi!, mediumC managerial o;nershi! as 5> o &2> and highC o;nershi! as

grea er han &2>. We selec hese di#isions based on !rior research on he le#el of managerial

o;nershi! and !erformance ha finds firm #alue rises ;hen managemen o;nershi! is be ;een

0> and 5/4>, and hen decreases as inside o;nershi! rises abo#e &2> ?'hen, He1 er and Hu,

& % . :his s ra ifica ion does no gi#e an e=ual number of obser#a ions in each o;nershi! grou!

because a significan number of firms ha#e no or lo; managerial o;nershi! in our sam!le of

SN 500 firms. :able summarizes hese resul s.

We find a significan nega i#e rela ionshi! be ;een managerial o;nershi! and Oo#erallA

disclosure, Oo;nershi! s ruc ure and in#es or rela ionsA disclosure and Oboard and managemen

!rocessesA disclosure for firms ;i h lo; le#els of managerial o;nershi!. :here is also a

significan nega i#e rela ionshi! be ;een managerial o;nershi! and Oo;nershi! s ruc ure and

in#es or rela ionsA disclosure for firms ;i h medium le#els of managerial o;nershi!. :hese

&4

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findings sugges ha he rela ionshi! be ;een managerial o;nershi! and disclosure #aries ;i h

he le#el of managerial o;nershi!. :he resul s also su!!or our hy!o hesis ha as managerial

o;nershi! le#els increase and hus agency cos s decrease, he le#el of disclosure decreases.

:hese findings are consis en ;i h he findings by @elb ?2000 .

le#els of managerial o;nershi!- 7M7ed and 7MHigh, res!ec i#ely.

:he resul s are !resen ed in :able 4.

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OmediumA and OhighA le#els of managerial o;nershi! are significan and !osi i#e. While

managerial o;nershi! sho; a nega i#e rela ionshi! ;i h he le#el of disclosure for firms ;i h

less han 5> managemen o;nershi!, his rela ionshi! is almos neu ral ;i h he slo!es #ir ually

canceling ou each o her once he le#el of managerial o;nershi! is o#er 5>.

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high cor!ora e con rol indus ry ac s as a modera ing effec on he nega i#e rela ionshi! be ;een

managerial o;nershi! and in#es or rela ions disclosure bu increases he nega i#e rela ionshi!

;hen disclosing board and managemen !rocesses. We also find ha managerial o;nershi! is

nega i#ely rela ed o he disclosure of Omanagemen and board !rocessA for he firms ;i h high

!ercen age of ou side direc ors.

GGGGG he rela ionshi! #ir ually becomes neu ral.

:his !ro#ides su!!or for he heory ha he le#el of managerial o;nershi! influences he le#el

of discre ionary disclosure ac i#i ies of he firm.

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choose o disclose informa ion ha is ad#an ageous o he firm lends su!!or o he signaling

heory of disclosure. We find a significan rela ionshi! be ;een he le#el of ou side direc ors and

o#erall disclosure and he disclosure of board and managemen !rocess disclosure. )or firms

using a large number of ou side direc ors as a cor!ora e go#ernance mechanism, i ma es sense

ha hey ;ould ;an o disclose his y!e of informa ion o ou side in#es ors.

(no her e1am!le of selec i#e disclosure is found for firms ;i h 5> o &2> managerial

o;nershi! and in indus ries ;i h high le#els of a e o#er ac i#i y. :hese firms e1hibi an

enormous increase in he le#el of Oo;nershi! s ruc ure and in#es or rela ionsA disclosure. )or

firms ;i h hese le#els of managerial o;nershi!, he hrea of a eo#er has a significaneconomic im!ac u!on he managerial o;nershi! and he increased discre ionary disclosure

sugges s ha hese firms are in eres ed in ee! heir in#es ors informed and ha!!y o hel!

!re#en ac=uisi ions. Bu for firms ;i h higher or lo;er le#els of managerial o;nershi!, he

hrea of a eo#er does no ha#e such a significan economic im!ac and hese firms do no sho;

a significan increase in in#es or rela ions disclosure. :his !ro#ides an addi ional e1am!le of

selec i#e disclosure ;here he le#el and y!e of informa ion disclosed is influenced by

managerial o;nershi! as ;ell as cor!ora e go#ernance mechanisms.

:he resul s of his s udy sugges ha le#el of managerial o;nershi! and o her cor!ora e

go#ernance mechanisms are in errela ed. rior heore ical research has !ro#ided mo i#a ional

models for firm discre ionary informa ion based on disclosure reducing he informa ion

asymme ry com!onen of ca!i al cos s ?Diamond and errecchia & &, errecchia 200&, Jhang

200& ;i h em!irical e#idence su!!or ing his #ie;. Ho;e#er, his s udy finds he le#el of

discre ionary financial rans!arency and informa ion disclosure is no significan ly rela ed o he

le#el of discre ionary disclosure of board and managemen !rocesses and s ruc ure disclosure.

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addi ion, ;e found no significan correla ions for he le#el of financial and informa ion

disclosure for any y!e of cor!ora e go#ernance mechanisms e1ce! for u ili y indus ries. )ur her

research in o he cos of e=ui y ca!i al com!aring he y!e of discre ionary disclosure could

!ro#ide some illumina ion o ;ha y!es of disclosure affec he cos of ca!i al he mos .

22

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R&5&R&(C&S

(gra;al, (., N Knoeber, '. I. ?& . )irm !erformance and mechanisms o con rol agency !roblems be ;een managers and shareholders. 4ournal o# ,inancial and (uantitati!e &nalysis5 %&?% , %44/% 4.

( erlof, @. (. ?& 40 . :he 7ar e for U*emonsU- Luali y $ncer ain y and he 7ar e7echanism. (uarterly 4ournal o# Economics5 8+?% , +88/500.(lchian, (. (., N Demse z, H. ?& 42 . roduc ion,

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Ed;ards, E. M., N Bell, . W. ?& & . he heory and Measurement o# "usiness %ncome. Ber eley- $ni#ersi y of 'alifornia ress.

Eisenhard , K. 7. ?& 8 . (gency :heory- (n (ssessmen (nd Ie#ie;. &cademy o# Management. :he (cademy of 7anagemen Ie#ie;, &+?& , 54/4+.

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VVVVV N errecchia, I. E. ?200& . :he rela ion among disclosure, re urns, and rading #olumeinforma ion. &ccounting +e!iew5 4 ?+ , %%/ 5+

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5#G4R& 1Relationships 2etween Corporate Governance Mechanis0s

2

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TAB/& 1Co0position o) Sa0ple 2y 6 Digit S#C #ndustry

#ndustry 5re7uency ercentBasic

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TAB/& 6Descriptive Statistics )or All Varia2les

7ean 7inimum 7edian 7a1imumD

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TAB/& 8Descriptive Statistics )or Sa0ple 5ir0s Strati)ied 2y the /evel o) Managerial Ownership

(ll scores are he mean le#el for ha range of o;nershi!.9Highes *e#el re!resen s firms ;i h managerial o;nershi! grea er han 4.0>9Higher *e#el re!resen s firms ;i h managerial o;nershi! from &.8> o 4.0>97edium *e#el re!resen s firms ;i h managerial o;nershi! from .5> o &.8>9*o; *e#el re!resen s firms ;i h managerial o;nershi! from .00&> o .5>9"one re!resen s firms ;i h managerial o;nershi! ;i h no managerial o;nershi!.

"one9 *o;9 7edium9 Higher9 Highes 9

M#erall Disclosure Score 4&.&%2 40. 2%+ 8.445 8. 4+ 8. ++M;nershi! S ruc ure Score 52.285 52.4%% 50.+ 50.22% 5&.4 2)inancial :rans!arency Score 44.+&% 4 .&22& 45.2&+ 4 .5% 44.&+%7anagemen rocess Score 4 . &+ 4 .045 4 . 04 4 .0&4 4+.28*e#el of Deb 0.2%+ 0.20 0.2&+ 0.&55 0.&07ar e o Boo Ia io 2.&4 2.25%5 2. ++ +.2&4 %.28

Size by Sales in millions&%4%2. 2

% .% %% 520 .+& 8 42.0 % +8+.485

Size by (sse in millions25+28.+4

8 45. 8 488%. & 2& 5+. 0+ 4+ . 8

*e#el of 7anagerialM;nershi! 0 0.2&4 &.& + +.0 5 &4.&+8 "umber of )irms in @rou! 2++ %2 %2 %% %&

2

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TAB/& :Results o) Regression Tests o) Managerial Ownership on 5ir0 Disclosure Scores

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TAB/& ;Regression Results Strati)ied 2y /evel o) Managerial Ownership

D

De!enden ariables 'oefficien

a :he o#erall !ercen age score for SN :rans!arency and Disclosure Sur#ey. b :he !ercen age score for SN o;nershi! s ruc ure and in#es or rela ionsdisclosure. c :he !ercen age score for SN financial rans!arency and informa ion disclosure. d :he !ercen age score for SN board and managemen s ruc ureand !rocesses disclosure.& :he !ercen age of managerial o;nershi! for he o! fi#e managers of he firm. 2 :he !ercen age of o al salary ha is e=ui y based for he o! managers of hefirm. % :he !ercen age of ou side direc ors ha com!rise he board of direc ors. + :he !ercen age of shares held by bloc o;ners from !ro1y s a emen s. 5 :he

!ercen age of shares held by ins i u ions. :he !ercen age of firms merged or ac=uired in he firms 2 digi indus ry. 4 ( dummy #ariable se o one if he firm isin a highly regula ed u ili y indus ry. 8 ( dummy #ariable se o one if he firm is in a highly regula ed finance indus ry. :he le#el of deb measured by he boo#alue of deb di#ided by he boo #alue of deb !lus mar e #alue of e=ui y. &0 7ar e o Boo Ia io. && *ogari hm of firmAs annual sales. 99 Significan a he .0& le#el 9 Significan a he .05 le#el.

%2

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TAB/& =Results o) Regression with #nteraction Varia2les

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