The Use of Internet as a Mean for Promoting Disclosure and Corporate Governance: The Case of Greece

It is the first paper that fully analyzes the disclosure status (legal and practical) through corporate web sites in Greece. The paper proposes that transparency and disclosure status should become a key performance indicator for the quality of management and for the quality of information released by the firm. The hypothesis is that disclosure of information, as a measure of corporate governance quality, should have a strong relation with firm performance. The paper seeks to establish a connection between the newly enforced IFRS and Corporate Governance in Greece by examining information disclosure of listed firms in their corporate sites on the Internet (WWW). Both initiatives (IFRS and CG reforms) have a common ground and that is the disclosure of information as they both advocate that a firm must release all material information to the shareholders and other stakeholders. This paper tries to find the impact of these initiatives in promoting transparency and accountability in Greek listed firms. The paper seeks to find the relationship between performance-corporate governance and information disclosure so that academics, practitioners, vendors and managers can formulate principles, strategies and practices to enhance the level of corporate governance and firms’ communication with the stakeholders. The basic driver for the paper is the OECD’s principles (2004) of Corporate Governance and the fact that all the major documents and research for the issues of CG are related, directly or indirectly, with the disclosure of information. The problem is determination of which information is necessary or mandatory to participate in management or to control the decision and actions of the controlling stakeholder and at what cost-channel of dissemination or format? Bhimani and Soonawalla (2005) argue that disclosure is a corporate responsibility. Information is the necessary basis for the decision making process and accountability. The basic anti-motives for disclosure are the costs of disclosure, the loss of competitive advantage (Welch and Rotbarg, 2006; Makadok, 2003), the security of information (Burns, 2001) and the rigidity of corporate functions. Internet has some advantages (low cost, directness of information, accessibility, rich format and the capability to connect directly with the Enterprise System) that make it the most appropriate mean of corporate information dissemination.The corporate web sites of 294 Greek listed firms have been reviewed in order to identify whether there is adequate information for a shareholder or a potential investor to take a rational decision. Twenty nine (29) information issues were identified and used. Four broad categories of information were identified: namely, general information for the firm (eleven issues), financial information (nine issues), Board of Directors (BoD) composition (six issues) and General Shareholders’ Meeting (GSM) information (3 issues). A cluster analysis is used to find commonalities of disclosure among the firms or commonalities of disclosure among the variables used. The sample was divided in groups according to: a) Capitalization (60 biggest with the rest) and b) Median of performance measurement (ROA, ROE, Tobin’s Q). A correlation matrix has been calculated.To further examine the relation between financial performance and disclosure the authors have divided the sample using cluster analysis and independent sample t-test was used to test the hypothesis of the same mean between the clusters. Two sets of controls have taken place. The first set is used to examine the relation of disclosure with financial performance. The second one examines the opposite relation of financial performance with disclosure status.The results of the data analysis show that Greek firms are disclosing only the mandatory (by law) information. They do not release, voluntary, information, especially, information about the decision making process, the evaluation of the management team. Information dissemination (disclosure) transparency is not related with financial performance. The paper is a first step in identifying the drivers of enhancing disclosure regimes. Further research should be done for the relationship between disclosure and ownership, disclosure and market volatility, etc.