Corporate Governance Mechanisms and Supplementary Commentary on the Primary Financial Statements

Dalia Hasan, Basheer A Khamees

Abstract


The purpose of the study is to investigate the relationship between supplementary narrative commentary extent and focus on amounts reported in the primary financial statements, with corporate governance mechanisms; board size, independent non-executive directors, audit committee independence, audit committee members financial expertise. Ordinary least squares regression analysis was used to analyze the data collected from 96 industrial and service companies listed on Amman Stock Exchange (ASE) for the years (2012-2013).
The results showed a positive relationship between the extent and focus of the supplementary narrative commentary and proportion of non-executive directors. Moreover, it showed significant negative relationship between supplementary narrative commentary extent with audit committee financial expertise and insignificant relationship between supplementary narrative commentary focus and audit committee financial expertise. Finally, no relationship was found between board size and audit committee independence with the extent and focus of supplementary narrative commentary.
The main recommendations stated that the regulatory bodies and managers should pay more attention to supplementary narrative commentary. In addition to that, it is important to examine its extent and focus of supplementary narrative commentary with other corporate factors. Moreover, conduct the study on sectors other than the industrial and service sectors. Finally, examine other disclosure media-other than the annual reports, that the company might use to disclose supplementary narrative commentaries

Keywords


Supplementary narrative commentary, Impression management, Voluntary disclosure, Corporate Governance.

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