CORPORATE BOARD CHARACTERISTICS, OWNERSHIP STRUCTURE, VOLUNTARY DISCLOSURE, AND VALUE OF FIRMS LISTED AT THE SECURITY EXCHANGES IN EAST AFRICA

Abstract

Firm value is investor perception towards the company’s degree of success as reflected in share price for publicly listed companies. This research postulates that firm value is affected by corporate board characteristics, ownership structure, and voluntary disclosure as the mediating variable. However, this is not evidently clear through empirical research. This study was anchored on agency, signalling, upper echelons, and pecking order theories. The study used the positivism research philosophy and correlation research design. The target population comprised 104 firms listed in the EASE. Annual data was gathered over the period 2011 to 2020 ad analysed using descriptive statistics that include means, standard deviation, minimum and maxims, and inferential statistics using Pearson correlation and regression analysis. Correlation results show that board diversity, and composition involving non-executives independent on the risk management committee have positive and significant correlations with Tobin’s Q, ROA, and ROE. Voluntary disclosures among the listed EASE firms depicted a significant correlation with Tobin’s Q and an insignificant correlation with ROA or ROE. Board size, board gender diversity, board independence, and the presence of nonexecutive independent composition on the risk management committee had a significant influence on voluntary disclosures and firm value except chairperson duality. Ownership structure, foreign ownership, institutional ownership, managerial ownership, and government ownership have a positive and significant effect on voluntary disclosure. Institutional ownership had a positive and significant effect on firm value whereas foreign ownership, managerial ownership, and local ownership were statistically insignificant. Government ownership indicated a negative and statistically significant effect on firm value. Voluntary disclosure has full mediation on the relationship between ownership structure and firm value using Tobin’s Q and partial mediation using ROA. The study concluded that all the corporate board characteristics influence voluntary disclosures and firm value of listed firms. It further concludes that local, government, managerial, institutional, and foreign ownership influence social and board information disclosures. A conclusion is further made that institutional ownership affects firm value. The study recommends proper structuring, creation, and optimization of board structure in terms of optimal board size, a combination of independent and non-independent directors, and composition of the board in terms of gender and expertise to enhance voluntary disclosure. Additionally, the study recommends that listed firms ought to embrace the institutional and managerial form of ownership as it promotes voluntary disclosure of information. Compared to other forms of ownership structure, institutional and managerial ownerships are likely to improve price discovery, increase allocative efficiency, knowledge creation and sharing, and promote management accountability. The creation of the board should be guided by key parameters that include the size of the board, expertise and competence, independence, and diversity among other critical aspects of an efficient board. The study findings made a significant contribution to empirical literature and theoretical underpinning. The study established that board characteristics and voluntary disclosure of information have significant influence on firm value among the listed firms supporting the agency theory. In addition, the findings support the postulation of the signaling theory on the importance of voluntary disclosure on firm value.