The Relative Value Relevance of Shareholder Versus Stakeholder Corporate Governance Disclosure Policy Reforms in South Africa

Corporate Governance: An International Review, Vol. 20, No. 1, pp. 84-105, 2012

Posted: 18 Dec 2011 Last revised: 18 Oct 2014

See all articles by Collins G. Ntim

Collins G. Ntim

University of Southampton Business School, UK; University of Southampton

Kwaku K. Opong

University of Glasgow - Adam Smith Business School

Jo Danbolt

University of Edinburgh Business School

Multiple version iconThere are 2 versions of this paper

Date Written: December 18, 2011

Abstract

Manuscript Type: Empirical.

Research Question/Issue: South Africa (SA) has pursued a distinctive corporate governance (CG) disclosure policy reforms in the form of the King Reports, which require firms to comprehensively disclose a set of recommended good CG practices on both shareholders and stakeholders. This paper investigates the effect of the new shareholder and stakeholder CG disclosure rules on firm value, as well as the relative value relevance of comprehensively disclosing good CG practices on shareholders versus stakeholders.

Research Findings/Insights: Using a sample of 169 SA listed firms from 2002 to 2007, we find that comprehensive disclosure of good CG practices on both shareholders and stakeholders impact positively on firm value, with the latter evidence providing new explicit support for the resource dependence theory. However, we provide additional new evidence, which suggests that disclosure of shareholder CG practices contributes significantly more to firm value than stakeholder ones. Our results are robust to controlling for different types of endogeneities.

Theoretical/Academic Implications: The paper generally contributes to the literature on the association between comprehensive disclosure of CG practices and firm value by specifically modelling the relationship within a unique institutional and CG environment. Specifically, we make two new contributions to the extant literature. First, we show how comprehensive stakeholder CG disclosures impact on firm value. Second, we provide evidence on the relative value relevance of comprehensively disclosing shareholder and stakeholder CG practices.

Practical/Policy Implications: Our results have important policy and regulatory implications, especially for authorities in other developing countries facing socio-economic problems that are currently contemplating or pursuing CG disclosure policy reforms. Since our evidence indicates that additional value can be created for firms that provide more transparent information on stakeholder CG practices, it provides authorities in other emerging countries currently planning or pursing CG reforms with a strong motivation to formally extend CG disclosure rules to cover both shareholder and stakeholder provisions.

Keywords: Corporate Governance, Disclosure Policy Reforms, Shareholders and Stakeholders, Firm Value, South Africa

JEL Classification: G12, G34, G38

Suggested Citation

Ntim, Collins G. and Opong, Kwaku K. and Danbolt, Jo, The Relative Value Relevance of Shareholder Versus Stakeholder Corporate Governance Disclosure Policy Reforms in South Africa (December 18, 2011). Corporate Governance: An International Review, Vol. 20, No. 1, pp. 84-105, 2012, Available at SSRN: https://ssrn.com/abstract=1974133

Collins G. Ntim (Contact Author)

University of Southampton Business School, UK ( email )

Southampton Business School
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Southampton, England SO17 IBJ
United Kingdom
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HOME PAGE: http://www.southampton.ac.uk/business-school/about/staff/cgn1n11.page

University of Southampton ( email )

Southampton, SO17 1BJ
United Kingdom

Kwaku K. Opong

University of Glasgow - Adam Smith Business School ( email )

University Avenue
Gilbert Scott Building
Glasgow, Scotland G12 8QQ
United Kingdom

Jo Danbolt

University of Edinburgh Business School ( email )

University of Edinburgh
29 Buccleuch Place
Edinburgh, Scotland EH8 9JS
UNITED KINGDOM

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