Voluntary Corporate Governance Disclosures by Post-Apartheid South African Corporations

Abstract

Purpose – This paper investigates as to whether post-Apartheid South African (SA) listed corporations voluntarily comply with and disclose recommended good corporate governance (CG) practices and, if so, the major factors that influence such voluntary CG disclosure behaviour.

Design/methodology/approach – We construct a broad voluntary CG disclosure index containing 50 CG provisions from the 2002 King Report using a sample of 169 SA listed corporations from 2002 to 2006. We also conduct regression analysis to identify the main drivers of voluntary CG disclosure.

Findings – Our results suggest that while compliance with, and disclosure of, good CG practices varies substantially among the sampled companies, CG standards have generally improved over the five-year period examined. We also find that block ownership is negatively associated with voluntary CG disclosure, while board size, audit firm size, cross-listing, the presence of a CG committee, government ownership and institutional ownership are positively related to voluntary CG disclosure.

Practical implications – Our findings have important implications for policy-makers and regulators. Evidence of improving CG standards implies that efforts by various stakeholders at improving CG standards in SA companies have had some positive impact on CG practices of SA firms. However, the substantial variation in the levels of compliance implies that enforcement may need to be strengthened further.

Originality/value – There is a dearth of evidence on the level of compliance with the King Report. Our study fills this gap by providing evidence for the first time on the level of compliance achieved, as well as contributing generally to the literature on compliance with codes of good governance and voluntary disclosure.

Keywords: Voluntary disclosure, Corporate governance, Affirmative action, King Report, South Africa

JEL Classification: G12, G34, G38