In a principal-principal setting, the presence in the boardroom of independent direc- tors appointed by minority shareholders can provide a unique and effective corporate governance solution to reduce agency costs related to undue appropriation of the pri- vate benefits of control by majority shareholders to the detriment of minority ones and compress information asymmetry issues. Independent minority directors act- ing as conduits of information to the market facilitate further engagement by active shareholders, promote better communication, and reduce disclosure manipulation. The growing relevance of Corporate Social Responsibility (CSR) related informa- tion on decision investment and the easy manipulation of non-financial information has prompted the authors of this paper to investigate whether independent minority directors can play an important monitoring role in conveying non-financial informa- tion to the market, thereby reducing managerial self-serving and manipulative prac- tices in non-financial reporting. By examining a sample of Italian-listed companies from 2017 to 2020, we perform a lexicon-based content analysis on their non-finan- cial reports and then use panel data dependence techniques to address our research aim. Our results suggest that, by reducing managerial self-serving and manipula- tive practices of non-financial reporting, minority shareholders’ representativeness impacts firms’ communication choices. This evidence confirms that independent minority directors are the right path for boosting minority shareholders’ legal pro- tection and ensuring investors’ awareness in the decision-making process.

Independent minority directors against self‐serving and manipulative practices in non‐ financial reporting

Vinciguerra Rosa
;
Pizzo Michele;
2024

Abstract

In a principal-principal setting, the presence in the boardroom of independent direc- tors appointed by minority shareholders can provide a unique and effective corporate governance solution to reduce agency costs related to undue appropriation of the pri- vate benefits of control by majority shareholders to the detriment of minority ones and compress information asymmetry issues. Independent minority directors act- ing as conduits of information to the market facilitate further engagement by active shareholders, promote better communication, and reduce disclosure manipulation. The growing relevance of Corporate Social Responsibility (CSR) related informa- tion on decision investment and the easy manipulation of non-financial information has prompted the authors of this paper to investigate whether independent minority directors can play an important monitoring role in conveying non-financial informa- tion to the market, thereby reducing managerial self-serving and manipulative prac- tices in non-financial reporting. By examining a sample of Italian-listed companies from 2017 to 2020, we perform a lexicon-based content analysis on their non-finan- cial reports and then use panel data dependence techniques to address our research aim. Our results suggest that, by reducing managerial self-serving and manipula- tive practices of non-financial reporting, minority shareholders’ representativeness impacts firms’ communication choices. This evidence confirms that independent minority directors are the right path for boosting minority shareholders’ legal pro- tection and ensuring investors’ awareness in the decision-making process.
File in questo prodotto:
Non ci sono file associati a questo prodotto.

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11591/548352
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus 0
  • ???jsp.display-item.citation.isi??? 0
social impact