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Voluntary Disclosure and Political Sensitivity: The Case of Executive Remuneration

Zakaria, Idlan (2011) Voluntary Disclosure and Political Sensitivity: The Case of Executive Remuneration. Working Paper. EBS Working Papers, Colchester.

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Abstract

This study investigates the relation between firm political sensitivity and the quality and quantity of voluntary disclosures, with special reference to the case of executive remuneration disclosures. I study the relation between firm political sensitivity and the quality and quantity of annual bonus plan disclosures, applying two competing (but not mutually exclusive) theories: political cost theory and managerial power theory. Political sensitivity is proxied using the magnitude of the annual bonus rather than firm size, which while popular in existing literature, is not a perfect proxy for political sensitivity (Ball and Foster, 1982, Meek et al, 1995; Cormier et al, 2005). Results reveal a significant positive relation between disclosure quantity and political sensitivity measures, and a significant negative relation between disclosure quality and political sensitivity proxies. This indicates that managers who are more susceptible to political sanctions related to their remuneration tend to disclose higher volumes of lower quality information. Consistent with earlier studies, the results confirm that firm size is related to voluntary disclosure, and the results also reveal that the use of remuneration consultants have a significant positive effect on disclosure quantity but no impact on disclosure quality.

Item Type: Monograph (Working Paper)
Uncontrolled Keywords: corporate governance; executive remuneration; voluntary disclosure; disclosure quality; remuneration consultants
Subjects: H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
Divisions: Faculty of Social Sciences > Essex Business School
Faculty of Social Sciences > Essex Business School > Essex Accounting Centre
Depositing User: Users 161 not found.
Date Deposited: 02 Jan 2014 11:40
Last Modified: 13 Nov 2015 16:09
URI: http://repository.essex.ac.uk/id/eprint/8118

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