How do firm- and country-level governance mechanisms affect firms' disclosure?

Jürgen Ernstberger, Michael Grüning

Research output: Contribution to journalArticlepeer-review

61 Scopus citations


This paper examines how a country's regulatory environment interacts with firms' institutional corporate governance arrangements to affect the disclosure that these firms provide in their annual reports. Prior literature indicates that firms with stronger corporate governance arrangements demonstrate higher levels of disclosure. We investigate whether this effect varies with the legal environment. The transparency-increasing effect of strong corporate governance might be reinforced by a strong legal environment, suggesting a complementary relationship between these two factors with respect to transparency. However, strong corporate governance arrangements may serve as bonding mechanisms in weak legal environments, suggesting a substitutive relationship between corporate governance and the regulatory environment. Using a sample of listed firms from 16 European countries, we find evidence suggesting that corporate governance arrangements and the legal environment substitute with respect to their effects on corporate disclosure.

Original languageEnglish
Pages (from-to)50-67
Number of pages18
JournalJournal of Accounting and Public Policy
Issue number3
StatePublished - May 2013
Externally publishedYes


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