Board independence and disclosure quality of the UK Investor Relation Magazine Award winning public firms: a matched-pair analysis

We examine the interactions between board independence and disclosure quality for the UK Investor Relation Magazine Award (IRMA) winning firms being experimental sample (170 firms), and control sample of non-winning firms (170 firms) during the years from 2005-2008. We provide strong evidence of positive reciprocal relationships between board independence and disclosure quality after controlling for a set of internal and external governance variables. We further document complementary effects of some internal and external governance variables on disclosure quality. With regard to matched-pair sample we find little difference between IRMA winning and non-winning firms in terms of their disclosure quality and governance practices, except higher (lower) coefficient value and stronger (smaller) effect of board independence (disclosure quality) on disclosure quality (board independence) for former firms than latter firms. These findings have policy implications for companies to take appropriate strategies in firms' governance and disclosure settings since these variables are able to enhance the monitoring effects and reputational value of the firms. Our results also provide additional insight on the conflicting and inconclusive findings in corporate governance and disclosure quality researches that has been plagued by endogeneity and causality issues.