Exploring the Quality Of Corporate Governance Disclosure under An ‘Apply And Explain’ Regime

This study explores the quality of corporate governance disclosure under an ‘apply and explain’ regime in the context of an emerging economy (Mauritius), following a transition from the traditional ‘comply or explain’ approach within the national code of corporate governance. The research relies on a content analysis of corporate governance disclosure of 86 annual reports of companies listed on the Stock Exchange of Mauritius (SEM) for the financial periods 2018-2019 and 2019-2020 and One-way ANOVA tests and draws on the typology of corporate governance explanations developed by Shrives and Brennan (2015), focusing on specificity, location and comprehensiveness dimensions. We draw on legitimacy theory and the concepts of substantive and symbolic disclosures to guide our interpretation of the findings. From a specificity point of view, the disclosure index revealed significant variations, the highest score being four times the lowest score. With regards to location and comprehensiveness, only around half of companies are making optimum use of a corporate governance report and providing explanations by principles. We also illustrated how some firms provided symbolic disclosures. Overall, there are disparities in the application of the code by companies, reflected in a blend of substantive and symbolic disclosures to maintain their legitimacy. Our study examines ‘apply and explain’ disclosure in a developing country in contrast to the ’comply or explain’ approach studied so far in the literature. Merely professing a ‘well intended’ shift to the ‘apply and explain’ approach does not necessarily need to improvements in the quality of corporate governance disclosures. Companies, governance professionals and regulatory bodies could formulate disclosure guidance to better underpin the implications of the ‘apply and explain’ approach.