Abstract
This study examines how voluntary disclosures (VD) and corporate governance (CG) improve firm value through the moderating effect of a legal change in a continental context, namely France. Based on a sample of 1001 observations of French firms listed on the SBF 120 from 2006 to 2016, I experiment with the theoretical assumptions of the study. A generalized method of moments estimation was used to neutralize the endogeneity problem. I estimated five different models on the whole sample; then I tested these models by splitting the sample into sectors to check the robustness of our estimations. Findings show that voluntary disclosure is positively associated with the firm’s value. The empirical results also indicate that a change in the law, as a moderate variable, helps to widen the firm’s benefit by the development and improvement in its sound governance system. Moreover, this outcome is reliable with the view that the nexus between VD and CG can add value for the firm in the presence of favourable jurisdictions. This research provides guidelines for investors, managers and policymakers to increase firm value by the application of the best practices of VD and CG in the presence of an advantageous law. To improve their reliability and performance, firms adopt a good mechanism of governance that is harmonious with the law and disclose more voluntary information to attract investors. These results offer new insights to the voluntary disclosure and firm value literature. I suggest that the application of the directive 2013/34/EU improves the corporate governance system. Also, the quality aspect of information disclosed in annual reports increases the firm value. Second, I investigated the interaction between VD and firm value in the presence of a CG mechanism and interaction variables.
Similar content being viewed by others
References
Abdo, H., Mangena, M., Needham, G., & Hunt, D. (2018). Disclosure of provisions for decommissioning costs in annual reports of oil and gas companies: A content analysis and stakeholder views. Paper presented at the Accounting forum.
Aerts, W. 1994. On the use of accounting logic as an explanatory category in narrative accounting disclosures. Accounting, Organizations and Society 19 (4–5): 337–353.
Aljifri, K., Alzarouni, A., Ng, C., & Tahir, M. (2014). The association between firm characteristics and corporate financial disclosures: Evidence from UAE companies.
Al-Maghzom, A., K. Hussainey, and D.A. Aly. 2016. Corporate governance and risk disclosure: Evidence from Saudi Arabia. Corporate Ownership and Control Journal 13 (2): 145–166.
Alves, H., A. Rodrigues, and N. Canadas. 2012. Factors influencing the different categories of voluntary disclosure in annual reports: An analysis for Iberian Peninsula listed companies. Tekhne 10 (1): 15–26.
Amraha, M.R., H.A. Hashima, and A.M. Ariff. 2015. The moderating effect of family control on the relationship between board of directors effectiveness and cost of debt: Evidence from oman. International Journal of Economics, Management and Accounting 23 (2): 217.
Arellano, M., and O. Bover. 1995. Another look at the instrumental variable estimation of error-components models. Journal of Econometrics 68 (1): 29–51.
Assidi, S., and M.A. Omri. 2012. IFRS and information quality: Cases of CAC 40 companies global. Journal of Management and Business Research 12 (19): 72–83.
Bamber, L.S., J. Jiang, and I.Y. Wang. 2010. What’s my style? The influence of top managers on voluntary corporate financial disclosure. The Accounting Review 85 (4): 1131–1162.
Beattie, V. 2014. Accounting narratives and the narrative turn in accounting research: Issues, theory, methodology, methods and a research framework. The British Accounting Review 46 (2): 111–134.
Bens, D.A., T.H. Goodman, and M. Neamtiu. 2012. Does investment-related pressure lead to misreporting? An analysis of reporting following M&A transactions. The Accounting Review 87 (3): 839–865.
Biggerstaff, L., D. Cicero, and M.B. Wintoki. 2020. Insider trading patterns. Journal of Corporate Finance 64: 101654.
Blundell, R., and S. Bond. 1998. Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics 87 (1): 115–143.
Bonsall, S.B., and B.P. Miller. 2017. The impact of narrative disclosure readability on bond ratings and the cost of debt. Review of Accounting Studies 22 (2): 608–643.
Botosan, C.A. 1997. Disclosure level and the cost of equity capital. Accounting Review 1: 323–349.
Camfferman, K., and T.E. Cooke. 2002. An analysis of disclosure in the annual reports of UK and Dutch companies. Journal of International Accounting Research 1 (1): 3–30.
Carcello, J.V., and A.L. Nagy. 2004. Audit firm tenure and fraudulent financial reporting. Auditing: A Journal of Practice & Theory 23 (2): 55–69.
Cheng, B., I. Ioannou, and G. Serafeim. 2014. Corporate social responsibility and access to finance. Strategic Management Journal 35 (1): 1–23.
Cho, C.H., and D.M. Patten. 2007. The role of environmental disclosures as tools of legitimacy: A research note. Accounting, Organizations and Society 32 (7–8): 639–647.
Chow, C.W., and A. Wong-Boren. 1987. Voluntary financial disclosure by Mexican corporations. Accounting Review 1: 533–541.
Chung, H., W.Q. Judge, and Y.-H. Li. 2015. Voluntary disclosure, excess executive compensation, and firm value. Journal of Corporate Finance 32: 64–90.
Cooke, T.E. 1992. The impact of size, stock market listing and industry type on disclosure in the annual reports of Japanese listed corporations. Accounting and Business Research 22 (87): 229–237.
Cooke, T.E., and R.O. Wallace. 1989. Global surveys of corporate disclosure practices and audit firms: A review essay. Accounting and Business Research 20 (77): 47–57.
Davis, A.K., and I. Tama-Sweet. 2012. Managers’ use of language across alternative disclosure outlets: Earnings press releases versus MD&A. Contemporary Accounting Research 29 (3): 804–837.
Davis, L.R., D.N. Ricchiute, and G. Trompeter. 1993. Audit effort, audit fees, and the provision of nonaudit services to audit clients. Accounting Review 68: 135–150.
Fama, E.F., and K.R. French. 2000. Forecasting profitability and earnings. The Journal of Business 73 (2): 161–175.
Fama, E.F., and M.C. Jensen. 1983. Separation of ownership and control. The Journal of Law and Economics 26 (2): 301–325.
Firth, M. 1978. Qualified audit reports: Their impact on investment decisions. Accounting Review 73: 642–650.
Frankel, R., W.J. Mayew, and Y. Sun. 2010. Do pennies matter? Investor relations consequences of small negative earnings surprises. Review of Accounting Studies 15 (1): 220–242.
Garcia-Meca, E., and J.P. Sanchez-Ballesta. 2010. The association of board independence and ownership concentration with voluntary disclosure: A meta-analysis. European Accounting Review 19 (3): 603–627.
Ge, R., and C. Lennox. 2011. Do acquirers disclose good news or withhold bad news when they finance their acquisitions using equity? Review of Accounting Studies 16 (1): 183–217.
Hafzalla, N.M. 2009. Managerial incentives for discretionary disclosure: Evidence from management leveraged buyouts. Review of Accounting Studies 14 (4): 507–533.
Ho, S.S., and K.S. Wong. 2001. A study of the relationship between corporate governance structures and the extent of voluntary disclosure7. Journal of International Accounting, Auditing and Taxation 10 (2): 139–156.
Hoelscher, S.A. 2019. Voluntary hedging disclosure and corporate governance. Review of Accounting and Finance 19 (1): 5–29.
Hope, O.-K., T. Kang, and J.W. Kim. 2013. Voluntary disclosure practices by foreign firms cross-listed in the United States. Journal of Contemporary Accounting & Economics 9 (1): 50–66.
Hui, K.W., and S.R. Matsunaga. 2014. Are CEOs and CFOs rewarded for disclosure quality? The Accounting Review 90 (3): 1013–1047.
Hütten, C., & Sessar, C. (2011). International Accounting Standards Board (IASB).
Inchausti, B.G. 1997. The influence of company characteristics and accounting regulation on information disclosed by Spanish firms. European Accounting Review 6 (1): 45–68.
Jensen, M.C. 1993. The modern industrial revolution, exit, and the failure of internal control systems. The Journal of Finance 48 (3): 831–880.
Jensen, M.C., and W.H. Meckling. 1976. Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics 3 (4): 305–360.
Jo, H., and Y. Kim. 2007. Disclosure frequency and earnings management. Journal of Financial Economics 84 (2): 561–590.
Jouber, H. 2019. How does CEO pay slice influence corporate social responsibility? US–Canadian versus Spanish-French listed firms. Corporate Social Responsibility and Environmental Management 26 (2): 502–517.
Khlif, H., K. Ahmed, and M. Souissi. 2017. Ownership structure and voluntary disclosure: A synthesis of empirical studies. Australian Journal of Management 42 (3): 376–403.
Kimbrough, M.D., and H. Louis. 2011. Voluntary disclosure to influence investor reactions to merger announcements: An examination of conference calls. The Accounting Review 86 (2): 637–667.
Kolsi, M.C. 2017. The determinants of corporate voluntary disclosure policy: Evidence from the Abu Dhabi Securities Exchange (ADX). Journal of Accounting in Emerging Economies 7 (2): 249–265.
Lakhal, F. 2005. Voluntary earnings disclosures and corporate governance: Evidence from France. Review of Accounting and Finance 4 (3): 64–85.
Lakhal, F. 2007. Ownership structure and voluntary disclosures: The case of French-listed firms. Corporate Ownership and Control 5 (1): 131–138.
Lang, M.H., and R.J. Lundholm. 2000. Voluntary disclosure and equity offerings: Reducing information asymmetry or hyping the stock? Contemporary Accounting Research 17 (4): 623–662.
Leung, S., L. Parker, and J. Courtis. 2015. Impression management through minimal narrative disclosure in annual reports. The British Accounting Review 47 (3): 275–289.
Leuz, C., and R.E. Verrecchia. 2000. Search in. Journal of Accounting Research 38: 91–124.
Li, Y., M. Gong, X.-Y. Zhang, and L. Koh. 2018. The impact of environmental, social, and governance disclosure on firm value: The role of CEO power. The British Accounting Review 50 (1): 60–75.
Lim, S., Z. Matolcsy, and D. Chow. 2007. The association between board composition and different types of voluntary disclosure. European Accounting Review 16 (3): 555–583.
Lopes, P.T., and L.L. Rodrigues. 2007. Accounting for financial instruments: An analysis of the determinants of disclosure in the Portuguese stock exchange. The International Journal of Accounting 42 (1): 25–56.
Merkley, K.J., L.S. Bamber, and T.E. Christensen. 2013. Detailed management earnings forecasts: Do analysts listen? Review of Accounting Studies 18 (2): 479–521.
Miller, G.S. 2002. Earnings performance and discretionary disclosure. Journal of Accounting Research 40 (1): 173–204.
Moreno, A., and A. Casasola. 2016. A readability evolution of narratives in annual reports: A longitudinal study of two Spanish companies. Journal of Business and Technical Communication 30 (2): 202–235.
Nekhili, M., S. Boubaker, and F. Lakhal. 2012. Ownership structure, voluntary R&D disclosure and market value of firms: The French case. International Journal of Business 17 (2): 126.
Owusu-Ansah, S., and J. Yeoh. 2005. The effect of legislation on corporate disclosure practices. Abacus 41 (1): 92–109.
Patelli, L., and A. Prencipe. 2007. The relationship between voluntary disclosure and independent directors in the presence of a dominant shareholder. European Accounting Review 16 (1): 5–33.
Rutherford, B.A. 2018. Narrating the narrative turn in narrative accounting research: Scholarly knowledge development or flat science? Meditari Accountancy Research 26 (1): 13–43.
SEC. 2014. Petition for rulemaking regarding resubmission of shareholder proposals failing to elicit meaningful shareholder support. US Securities and Exchange Commission. Retrieved May 13, 2017, from https://www.sec.gov/rules/petitions/2014/petn4-675.pdf.
Shleifer, A., and R.W. Vishny. 1997. A survey of corporate governance. The Journal of Finance 52 (2): 737–783.
Shroff, N., A.X. Sun, H.D. White, and W. Zhang. 2013. Voluntary disclosure and information asymmetry: Evidence from the 2005 securities offering reform. Journal of Accounting Research 51 (5): 1299–1345.
Silva-Gao, L. 2012. The disclosure of environmental capital expenditures: Evidence from the electric utility sector in the USA. Corporate Social Responsibility and Environmental Management 19 (4): 240–252.
Tobin, J. 1969. A general equilibrium approach to monetary theory. Journal of Money, Credit and Banking 1 (1): 15–29.
Wallace, R.O., K. Naser, and A. Mora. 1994. The relationship between the comprehensiveness of corporate annual reports and firm characteristics in Spain. Accounting and Business Research 25 (97): 41–53.
Watts, R.L., and J.L. Zimmerman. 1986. Positive accounting theory. Englewood Cliffs: Prentice-Hall Inc.
Watts, R.L., and J.L. Zimmerman. 1990. Positive accounting theory: A ten year perspective. Accounting Review 65 (1): 131–156.
Welker, M. 1995. Disclosure policy, information asymmetry, and liquidity in equity markets. Contemporary Accounting Research 11 (2): 801–827.
Windmeijer, F. 2005. A finite sample correction for the variance of linear efficient two-step GMM estimators. Journal of Econometrics 126 (1): 25–51.
Yekini, L.S., T.P. Wisniewski, and Y. Millo. 2016. Market reaction to the positiveness of annual report narratives. The British Accounting Review 48 (4): 415–430.
Zhang, Y., G. Chong, and R. Jia. 2019. Fair value, corporate governance, social responsibility disclosure and banks’ performance. Review of Accounting and Finance 19 (1): 30–47.
Author information
Authors and Affiliations
Corresponding author
Ethics declarations
Conflict of interest
Author states that he has no conflict of interest to declare.
Additional information
Publisher's Note
Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
Appendix
Appendix
See Table 6.
Rights and permissions
About this article
Cite this article
Assidi, S. The effect of voluntary disclosures and corporate governance on firm value: a study of listed firms in France. Int J Discl Gov 17, 168–179 (2020). https://doi.org/10.1057/s41310-020-00090-1
Received:
Published:
Issue Date:
DOI: https://doi.org/10.1057/s41310-020-00090-1