Internal Control Information Disclosure and Corporate Governance: Evidence From an Emerging Market
This study assesses the impact of corporate governance factors on disclosure of internal control information. A data set from 110 firms in Ghana for the year ending 2013 was used. Each annual report was individually examined and coded in order to obtain the disclosure of internal control information index. Descriptive analysis was performed to provide the background statistics of the variables examined. This was followed by regression analysis which forms the main data analysis. The results of the disclosure of internal control information mean of 35%, indicate that most of the sampled firms did not disclose sufficient internal control information in their annual reports. The low level of internal control information disclosure cannot be used by stakeholders to determine level of corporate governance practices in the sampled companies. The results of the regression analysis indicate that board independence is the significant variable that explain the disclosure of internal control disclosure. This supports the generally held view that independent directors help to improve the quality of disclosure and increase the transparency of information.
This study contributes to the literature on the relationship between corporate governance and disclosure by showing that disclosure of internal control information in Ghana is associated with the proportion of independent board members. This findings support SOX 404 requirements even though this is not compulsory for Ghanaian firms unlike their US counterparts. The findings of this study will help market regulators in Ghana and Sub-Sahara Africa, Security and Exchange Commission (SEC) and the Sub-Sahara African Exchanges in evaluating the adequacy of the current disclosure regulations in their countries. Understanding the board composition and their impact on voluntary disclosure provides evidence on the sufficiency of the board of directors' guidelines in the corporate governance code in Sub-Sahara African countries.