Morning Knowledge /4. Transparency

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.