Morning Knowledge /4. Transparency
MARCO VENTORUZZO SHOWS THAT COMPANIES WITH INDEPENDENT AND MINORITY APPOINTED DIRECTORS ARE MORE TRANSPARENT THAN THE REST. DO YOU THINK THAT INDEPENDENT DIRECTORS BRING ALSO OTHER ADVANTAGES?Research by Piergaetano Marchetti, Gianfranco Siciliano and Marco Ventoruzzo highlights that independent and minority-appointed directors positively affect the quantity and quality (as perceived by the market) of information released, thus fostering minority protection and transparency.
The authors observe a positive relation between corporate disclosure (and, in particular, accounting-related disclosure) and the percentage of independent directors in the board. On average, an increase of 10% in the percentage of independent directors is associated to a 6.5% increase in the number of disclosures announced to the market and to a 14.5% increase in the number of accounting-related disclosures.
The quality of the independent directors is also relevant, since a significant portion of the additional disclosure occurs when independent directors are high-skilled (i.e. with professional qualifications and education above the median). Furthermore, information disclosed by high-skilled, independent directors is deemed valuable by the market, which reacts in a more pronounced way to this information than to information released by companies with lower-skilled independent directors.
«We can say that that the market relies more on better-educated and professionally qualified directors», Professor Ventoruzzo says.
by Fabio Todesco
