The Relative Value Relevance of Shareholder Versus Stakeholder Corporate Governance Disclosure Policy Reforms in South Africa

Manuscript Type: Empirical.Research Question/Issue: South Africa (SA) has pursued a distinctive corporate governance (CG) disclosure policy reforms in the form of the King Reports, which require firms to comprehensively disclose a set of recommended good CG practices on both shareholders and stakeholders. This paper investigates the effect of the new shareholder and stakeholder CG disclosure rules on firm value, as well as the relative value relevance of comprehensively disclosing good CG practices on shareholders versus stakeholders.Research Findings/Insights: Using a sample of 169 SA listed firms from 2002 to 2007, we find that comprehensive disclosure of good CG practices on both shareholders and stakeholders impact positively on firm value, with the latter evidence providing new explicit support for the resource dependence theory. However, we provide additional new evidence, which suggests that disclosure of shareholder CG practices contributes significantly more to firm value than stakeholder ones. Our results are robust to controlling for different types of endogeneities.Theoretical/Academic Implications: The paper generally contributes to the literature on the association between comprehensive disclosure of CG practices and firm value by specifically modelling the relationship within a unique institutional and CG environment. Specifically, we make two new contributions to the extant literature. First, we show how comprehensive stakeholder CG disclosures impact on firm value. Second, we provide evidence on the relative value relevance of comprehensively disclosing shareholder and stakeholder CG practices.Practical/Policy Implications: Our results have important policy and regulatory implications, especially for authorities in other developing countries facing socio-economic problems that are currently contemplating or pursuing CG disclosure policy reforms. Since our evidence indicates that additional value can be created for firms that provide more transparent information on stakeholder CG practices, it provides authorities in other emerging countries currently planning or pursing CG reforms with a strong motivation to formally extend CG disclosure rules to cover both shareholder and stakeholder provisions