Board structure and corporate disclosure via social media: an empirical study in the UK
| Date | 10 September 2018 |
| Pages | 595-614 |
| DOI | https://doi.org/10.1108/OIR-01-2017-0013 |
| Published date | 10 September 2018 |
| Author | Mohamed A.K. Basuony,Ehab K.A. Mohamed,Khaled Samaha |
| Subject Matter | Library & information science,Information behaviour & retrieval,Collection building & management,Bibliometrics,Databases,Information & knowledge management,Information & communications technology,Internet,Records management & preservation,Document management |
Board structure and corporate
disclosure via social media: an
empirical study in the UK
Mohamed A.K. Basuony
Department of Accounting, American University in Cairo, Cairo, Egypt
Ehab K.A. Mohamed
Department of Accounting and Finance, German University in Cairo,
Cairo, Egypt, and
Khaled Samaha
Department of Accounting, American University in Cairo, Cairo, Egypt
Abstract
Purpose –The purpose of this paper is to investigate the impact of board structure on voluntary corporate
disclosure via social media among the top 150 companies listed on the London Stock Exchange.
Design/methodology/approach –A disclosure index comprising of a set of items that encompass two
facets of disclosure, namely corporate disclosure via social networks and social media sites, is developed and
used. Binary logistic regression is used to test the research hypotheses.
Findings –The results of this study reveal the underlying relations between board composition and control
variables as the determining factors of corporate disclosure, i.e. board size, board activism, board
independence and board diversity (gender and ethnicity). The gender of the board can affect the corporate
disclosure via a social network. The results of this study indicate that an increase in the number of female in
the board members leads to higher corporate disclosure using social network. Moreover, firm size has a
positive effect on corporate disclosure indicating that large firms tend to disclose more information on their
websites and social networks.
Practical implications –The paper provides new insights into the role played by the non-executive
female directors in monitoring and controlling managerial processes related to corporate disclosure using
social media.
Originality/value –To the best of the authors’knowledge, this is the first paper that examines the role of
board structure in monitoring and controlling management decisions and managerial processes in the area of
corporate disclosure via social media.
Keywords Social media, UK, Board structure, Corporate disclosure, Board diversity
Paper type Research paper
1. Introduction
The timely disclosure of information is an important pillar of a strong and transparent
financial system. Corporate disclosure helps in enhancing financial markets by removing
any barriers to the flow of relevant information to the various stakeholders, hence
reducing information asymmetry and enhancing equality among investors, as well as
reducing agency costs. More transparency and better disclosure are associated with less
insider trading and lowers uncertainty in investment decisions (Klapper and Love, 2004;
Gallego Alvarez et al., 2008; Fuertes-Callén et al., 2014; Mohamed and Basuony, 2015).
Corporate governance can play an important role in ensuring the quality and timeliness of
the financial reporting process. Previous studies reveal a relation between poor governance
and poor financial reporting quality, financial statement fraud and weak internal controls
(Cohen et al., 2004; Mohamed et al., 2013).
The internet has revolutionized financial reporting by enabling companies to include the
traditional annual reports together with additional financial and non-financial information
in multiple formats ( Jones and Xiao, 2004). Disclosing information via the internet provides
Online Information Review
Vol. 42 No. 5, 2018
pp. 595-614
© Emerald PublishingLimited
1468-4527
DOI 10.1108/OIR-01-2017-0013
Received 11 January 2017
Revised 23 May 2017
1 August 2017
Accepted 27 October 2017
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1468-4527.htm
595
Board
structure and
corporate
disclosure
companies with the potential for large savings in the cost of production and distribution of
information and enables them to reach a much wider range of stakeholders at a relatively
lower cost (Dolinšek et al., 2014; Mohamed and Basuony, 2014). Moreover, it is possibly the
most powerful means of providing specific information to targeted stakeholders as a
legitimacy strategy (Campbell, 2003; Gallego Alvarez et al., 2008). Furthermore, the recent
dramatic spread in the use of social media has provided companies with a new platform for
the provision of corporate information.
The use of social media for corporate disclosure enables the interaction, not only
between the company and its stakeholders, but also between the stakeholders themselves
(Bonsón and Flores, 2011; Vernuccio, 2014; Broekemier et al., 2015). By using social media,
companies are not only able to easily reach a wider range of stakeholders on a real-time
basis, but they are also initiating real conversations with their stakeholders, as well as
facilitating online information sharing among stakeholders (Hearn et al., 2009; Du and
Jiang, 2014; Zhou et al., 2015). Companies using social media sites such Twitter and
Facebook are usually followed by many interested followers and since companies can
respond to any stakeholder’s tweet or comment, they can benefit from such conversation in
discovering the perceptions, opinions and feedback from stakeholders (Gupta, 2011). When
firms opt to use social media for either financial or non-financial information disclosure, they
usually do so as part of an overall strategy for online communication that aims to create
positive corporate image as well as to serve the firms’instrumental goals. Firms may adopt
ornamental, informational and relationalonlinepresencebasedontherelative
importance that is given to content over format (Agarwal and Venkatesh, 2002; Auger,
2005; Garcı´a-Borbolla et al., 2005). Companies can also use social media as information
dissemination tool as part of the strategy to limit the negative reactions toward adverse
situations. More importantly, communication via social media is an effective strategy to
reduce information asymmetry (Blankespoor et al., 2014; Lee et al., 2015).
Fair disclosure (FD) to the public was regulated through the Security and Exchange
Commission (SEC) to ensure that the general public is in the same foot to information as any
privileged party. In 2000, SEC released Regulation FD, which states that a company should
promptly make information public through traditional disclosure outlets (such as official
filing and press releases) if information were unintentionally passed to a non-public party. In
2008, SEC amended the 2000 regulation FD disclosure by providing guidelines to regulate
the use of company’s websites. Using social media for financial disclosure has recently
drawn great attention particularly after Netflix CEO Reed Hastings disclosed significant
information on his personal Facebook page in July 2012. This resulted in the increase of the
share price of Netflix from $70.45 at the time of the Facebook post to $81.72 at the close of
the following trading day. Netflix did not report this information to investors through a
press release or Form 8-K filing, and a subsequent company press release later that day did
not include this information. After carefully investigating the case, the SEC did not initiate
an enforcement action or allege wrongdoing by Hastings or Netflix, recognizing that there
has been market uncertainty about the application of Regulation FD to social media.
Consequently, in April 2013, the SEC has made further ruling stating that different social
media platforms are acceptable to disseminate information to general public. The SEC have
approved that the usage of corporate social media can be a way to disclose information but
has warned that personal social media sites of individuals employed by a public company
would not ordinarily be assumed to be channels through which the company would disclose
material corporate information (Securities and Exchange Commission, 2013; Alexander and
Gentry, 2014).
This paper investigates and reports on the extent, nature and determinants of voluntary
corporate disclosure via social media among the top 150 companies listed on the
London Stock Exchange (LSE). The paper explores corporate disclosure via social media
596
OIR
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