Relationship between corporate governance attributes and voluntary disclosures in annual reports: the Kenyan experience

The Kenya Government initiated reforms at the Nairobi Stock Exchange (NSE) aimed at transforming the exchange into a vehicle for mobilising domestic savings and attracting foreign capital investment. A key aspect of this reform is related to corporate governance practices. In 2000, the CMA issued draft corporate governance guidelines outlining significant changes to listed companies corporate governance practices – key among them were: establishment of an audit committee, independence of non-executive directors and separation of the roles of the CEO and board chair. Corporate financial reporting is an important part of the process for building investor confidence. Drawing on prior corporate disclosure research, this study using agency theory examines the association of corporate governance practices with the voluntary disclosures of selected information in the annual reports of Kenyan companies. Due to the panel nature of our data, to estimate the determinants of voluntary disclosure of various types of information, we use pooled Ordinary Least Square (OLS) with Panel-Corrected Standard Errors (PCSEs). Our results indicate that the presence of an audit committee is a significant factor associated with the level of voluntary disclosure, and the proportion of non-executive directors on the board is found to be significantly negatively associated with the extent of voluntary disclosure. In contrast, board leadership structure did not appear to have a significant influence on the level of voluntary disclosure by companies.