Media, independent non-executive directors and strategy disclosure by non-financial listed firms in the UAE

• DOI: https://doi.org/10.1108/CG-01-2019-0032
• Pages: 216-239
• Published date: 25 November 2019
• Date: 25 November 2019
• Author: Mostafa Kamal Hassan,Fathia Elleuch Lahyani
• Subject Matter: Corporate governance,Strategy

Media, independent non-executive

directors and strategy disclosure by

non-f‌inancial listed f‌irms in the UAE

Mostafa Kamal Hassan and Fathia Elleuch Lahyani

Abstract

Purpose –This study aims to investigate the effect of media coverage, negative media tone and the

interaction betweennegative media tone and independent non-executivedirectors (INEDs) on strategic

informationdisclosure (SD).

Design/methodology/approach –The authorsrely on media agenda-setting theory, agencytheory and

a panel data set of 52UAE non-financial listed firms from 2009 to 2016.Multivariate regressions examine

the effect of media coverageand negative media tone on SD and examine the moderation of INEDs on

the effect of negative media tone on SD while controlling for firm size, board size, board meeting

frequency,firm profitability and leverage.

Findings –The results show that negative media tone has a negative effect on SD, and there is no

association between media coverage and SD. The results show that INEDs are negatively associated

with SD and havea negative moderating effect on the negativemedia tone–SD relationship. INEDsfollow

a conservativeapproach, encouraging less SD whentheir firms face negative media tone.

Research limitations/implications –The authors measuredmedia coverage and negative media tone

by the number of news articles. In the robustness test, they use media tone score. They measuredSD

using an indexthat captures firm strategy dimensions.Though these measures are inherentlysubjective,

they were used to measure variation in media coverage, media tone and SD across listed UAE non-

financialfirms. Mitigation of subjectivitywas achieved through rigorous cross-checkingmeasurements.

Practical implications –Findings assist UAE policymakers and the international business community with

insights related to articulation of media to SD and INEDs’ role in moderating the effect of media on SD.

Originality/value –To the authors’knowledge, this is the first study that combines media agenda-setting

theory with agency theoryand SD in an emerging market economy (the UAE). The study is alsoamong

the few studiesthat illustrate the possible roleof INEDs under different media tonesin emerging markets.

Keywords Agency theory, Strategic disclosure, Media coverage, Media agenda-setting theory,

Media tone

Paper type Research paper

1. Introduction

Strategic information disclosure (SD) is a voluntary meansfirms frequently use to distinguish

themselves from their competitors and disseminate information about their mission, vision,

market, customers, plans and strategic goals (Santema and Van de Rijt, 2001;Santema

et al.,2005

;Lim et al.,2007;Hassan, 2015a, 2015b). Such information is used by a firm’s

external constituents (i.e. customers, investors, legislators, public and media) in their

decisions. The literature in SD has witnessed an increasing number of studies investigating

the effect of firms’ governance structure on the disclosure of strategic information on the

internet (Garcı

´a-Sa

´nchez et al.,2011;Hashim et al., 2014;Hassan, 2015a, 2015b), while

other studies examine strategic information reported in mission statements and firms’

annual reports (Leuthesser and Kohli, 2001;Bartkus et al.,2002;Campbell et al., 2001).

Mostafa Kamal Hassan and

Fathia Elleuch Lahyani are

both based at the

Department of Accounting

and Information Systems,

College of Business and

Economics, Qatar

University, Doha, Qatar.

Received 18 January 2019

Revised 19 June 2019

18 September 2019

6 October 2019

14 October 2019

Accepted 15 October 2019

©Mostafa Kamal Hassan and

Fathia Elleuch Lahyani.

Published by Emerald

Publishing Limited. This article is

published under the Creative

CommonsAttribution(CC BY

4.0) licence. Anyone may

reproduce,distribute,translate

and create derivative works of

this article (for both commercial

and non-commercial

purposes), subject to full

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publication and authors. The full

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PAGE 216 jCORPORATE GOVERNANCE jVOL. 20 NO. 2 2020, pp. 216-239, ©EmeraldPublishing Limited, ISSN 1472-0701 DOI 10.1108/CG-01-2019-0032

Although SD studies are conducted in different contexts (Santema and Van de Rijt, 2001;

Garcı

´a-Sa

´nchez et al.,2011[Spain]; Santema et al., 2005 [EU]; Hashim et al., 2014

[Malaysia]; Hassan, 2015a, 2015b [UAE]), they are mostly informed by agency theory,

reasoning that disclosure reducesinformation asymmetry and agency costs.

Most prior SD studies focused on exploring the influence of governance structure and firm-

specific characteristics, including size, board composition, ownership structure, board

meeting frequency, audit committee, firm complexity, leverage and profitability on the

extent of SD (Garcı

´a-Sa

´nchez et al.,2011;Hashim et al.,2014;Hassan, 2015a, 2015b) and

neglected media’s influence (as an institutional governance mechanism)on firms’ SD. While

growing research examines the role of media (coverage and tone) on corporate disclosure,

this research focuses on the disclosure of social and environmental information (Islam and

Deegan, 2010;Cuadrado-Ballesteros et al., 2014;Garcia-Sanchez et al.,2014;Rupley

et al., 2012;Elijido-Ten, 2011), whichmakes examining the media-SD association an under-

researched area, particularlyin emerging markets.

A closer analysis of governance-SD studies reveals their focus on documenting the

association between board composition and SD while ignoring board members’ behavior

when their firms face positive or negative media coverage. Their underlying rationale is that

board of directors’ composition in terms of a higher percentage of independent non-

executive external directors (INEDs) guarantees quality disclosure (Rupley et al.,2012;

Garcia-Sanchez et al.,2014;Zaman et al.,2018). INEDs monitor and control inside

directors’ actions and offset their opportunistic behaviors (Zaman et al., 2018). Theyprovide

outside perspectives to help firms achieve their strategic goals (Ibid.,). They have strong

stakeholder orientations and a high level of engagement that goes beyond shareholders to

include constituents such as the public, media, legislators, and those with legitimate

interests in the firm’s activities (Rupley et al.,2012;Garcia-Sanchez et al., 2014). Rupley

et al. (2012) argue that INEDs help in managing the firm’s relationships with external

constituents (e.g. media). Zaman et al. (2018) add that INEDs are experienced

professionals who bring the independence that carries a superior objective to monitor

management behavior by disclosinginformation. INEDs are partially motivated by monetary

incentives and look to enhance and protect their personal reputations (Ibid.). Our study,

therefore, focuses on INEDs and their moderating effect on the association between media

and SD.

Our study examines the effect of media(coverage and negative media tone) on SD through

a lens which combines notions of media agenda-setting theory and agency theory. Our

study contributes to the existing literature in several ways. First, it pioneers the articulation of

SD with media measures. Second, it integrates media agenda-setting theory with agency

theory to examine SD in an emerging capital market (the UAE). In this regard, our study

adds to prior studies which relied on media agenda-setting theory since they mainly

investigated the disclosure of social and environmental information (Islam and Deegan,

2010;Cuadrado-Ballesteros et al., 2014;Garcia-Sanchez et al.,2014;Rupley et al., 2012;

Elijido-Ten, 2011). Finally, our study acknowledges media’s role (as an institutional

governance mechanism) and investigates INEDs’ role in moderating the association

between media and SD.

There are several reasons to choose the UAE for this study. First, the UAE owns diverse

influential media outlets which serve as a regional media hub (Johnson, 2015). The country

established the National Media Council (NMC), which sets guidelines for electronic media

and news on websites, supports media in delivering responsible and professional material,

and ensures preserving local social values and culture (NMC No 11 of 2016, WAM news

agency, 6 March 2018) (National Media council, 2018). There is public trust in analytical

local media content, with a confidence levelof about 78.7 per cent (AL Bawaba, 2017). This

media environment provides an attractive opportunity to examine the association between

SD and media coverage and tone in the UAE, while relyingon media agenda-setting theory

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