What do Firms Disclose and Why? Enforcing Corporate Governance and Transparency in Central and Eastern Europe
SITE, Stockholm School of Economics
RTU Riga Business School and SITE, Stockholm School of Economics1
While specific corporate-governance rules are often controversial, most observers agree on the need to disclose who owns and controls a firm and what governance arrangements are in place. This paper examines such disclosure in a sample of 370 companies listed on stock exchanges in Central and Eastern Europe. The data show widespread non-disclosure of even the most basic elements of corporate-governance arrangements, despite existing regulation. The level of disclosure varies substantially across firms, and there is a strong country effect in what companies disclose. Overall, what is disclosed depends on the legal framework and practice in a given country, but it does not correlate with firms' financial performance. On the other hand, financial performance is strongly related with how easily available the information is to the public. In particular, information is more available in larger firms, firms with lower leverage, higher market-to-book ratios, and more concentrated ownership.
1 The data collection for this paper was financed through the Swedish–Hungarian Business Research Council. Anete Pajuste also acknowledges financial support from the CERGE-EI Foundation (under a programme of the Global Development Network). The authors have benefited from comments by Stijn Claessens, Colin Mayer, and participants at the ECGI/Oxford Review of Economic Policy conference on Corporate Governance (Saïd Business School, Oxford, 28–29 January 2005). We would like to thank Valdis Bulazs, Vilma Midveryte, Kristine Kolosovska, and, especially, Aleksei Avanessov, for excellent research assistance, and our country experts Maria Aluchna (Poland), Valdone Darskuviene (Lithuania), Aleksandra Gregoric (Slovenia), Evgeni Peev (Bulgaria), Dragos Pislaru and Janus Vince (Hungary), and Liviu Voinea (Romania) for substantial help.