Corporate governance and management incentives: evidence from the Scandinavian countries

• Published date: 05 February 2018
• Pages: 1-13
• DOI: https://doi.org/10.1108/CG-04-2017-0075
• Date: 05 February 2018
• Author: Belle Selene Xia,Ignace De Beelde
• Subject Matter: Strategy,Corporate governance

Corporate governance and management

incentives: evidence from the

Scandinavian countries

Belle Selene Xia and Ignace De Beelde

Abstract

Purpose –The Scandinavian boards are known for their “best practices” for corporate governance.

This paper aims to examine the management incentives behind corporate disclosure via an empirical

study.

Design/methodology/approach –Many of the previous empirical work have focused on theUS data,

but the generalizabilityof such findings is geographically bounded. The setof managementincentives in

this paper is examined usinga total sample of 123 local annual reports via some of the largest publicly

listedfirms in the Scandinavian countries betweenthe years 2008-2012.

Findings –The findings of this study revealthat a firm’s financial success originates from thedifferent

attributes of corporategovernance. Correlation and regression analysesreveal that in terms of firm size,

leverage ratio, the existence of audit committee and the independence of CEO, there is a correlation

between firm-specificfactors and the level of disclosure. In contrast to the previous literature,a positive

relationshipbetween corporate disclosureand information asymmetry was not found.

Originality/value –The results of this study are valuable to the policymakers when implementing

regulations on corporate governance control. The strategic implications of the findings on business

decisionsand future research are also discussed.

Keywords Strategic management, Corporate governance, Corporate disclosure,

Management incentives

Paper type Research paper

1. Introduction

Previous studies have established a key relationship between corporate governance and

corporate disclosure, where corporate disclosure can be used as an effective means to

reduce managerial opportunism and enhance firm performance, and thus remains as one

of the most popular topics of research in the accounting literature (Elshandidy and Neri,

2015). However, there has beena continuous debate in the traditional literature between the

level of disclosure and the different corporate governance attributes, such as the firm size,

the leverage ratio and information asymmetry(Nerantzidis and Tsamis, 2017). Over the past

decades, increasing attention has been placed in improving the accounting regulations of

corporate governance and corporate disclosure, which are the prerequisites of an efficient

financial market (Vidaver-Cohen and Brønn, 2015). Therefore, it is essential to update our

knowledge in the subject matter.

The level of corporate disclosure is found to be influenced by the national accounting

standards and the international requirements in financial reporting (Colares Oliveira et al.,

2016). However, these regulations may not contain stringent requirements for the financial

reporting of strategic information, as some of these regulations are for guidance purposes

only. When firms have the flexibility to choose their own reporting style, the level of

Belle Selene Xia is

Distinguished Researcher

and Ignace De Beelde is

Professor, both at the

Department of Accounting

and Corporate Finance,

Faculty of Economics and

Business, Universiteit Gent,

Gent, Belgium.

Received 28 April 2017

Revised 26 July 2017

8 August 2017

Accepted 28 August 2017

An earlierversionof this paper

was present at the Accounting

ResearchDay at theUniversity

of Ghent, March 2016. The

authors are extremely grateful for

the valuable feedback and

contribution of Professor Heidi

Vander Bauwhede, Professor

Philippe Van Cauwenberge,

Professor Mirjam Knockaert and

Dr Elia Liitia

¨inen. The authors

express sincere gratitude to the

honorable Editor-in-Chief

Professor Gabriel Eweje and two

anonymous reviewers whose

suggestions have resulted in

majorimprovementsin this

paper. Any remaining errors are

entirely the authors’

responsibility.

DOI 10.1108/CG-04-2017-0075 VOL. 18 NO. 1, 2018, pp. 1-13, © Emerald Publishing Limited, ISSN 1472-0701 jCORPORATE GOVERNANCE jPAGE 1