Transparency on Corporate Governance and board of directors’ strategies

Abstract

Based on agency and asymmetric information theories, the objective of this paper is to investigate whether the transparency on corporate governance is determined by strategies followed by the board of directors (liquidity, investment, capital structure, innovation and board composition impact on the corporate governance transparency). The study sample is composed by 826 observations from Latin American firms during the period 2004-2010 (128 unique firms). A two-way cluster standard errors and GMM methods have been adopted to perform the econometric analysis. Results suggest that corporate governance disclosure is attributable to changes on firm’s decisions made by the board with respect to financial aspects and innovation. However, the impact upon transparency of board composition with regards to female directors, independence and size of boards are attributable to industry and/or country effects. Although the main limitation of the study is focused on the period of analysis, the results provide important implications for the business sector, demonstrating that the board composition and the financial and innovation strategies adopted by the board encourage greater corporate transparency, thus increasing confidence in the markets.