Internet Financial Reporting

Available online at www.sciencedirect.com

Journal of Accounting and Public Policy 27 (2008) 62–87

www.elsevier.com/locate/jaccpubpol

The impact of corporate governance

on Internet financial reporting

Andrea S. Kelton a, Ya-wen Yang b,*

a

School of Accountancy, University of South Florida, 4202 E. Fowler Avenue,

BSN3403, Tampa, FL 33620, United States

b

Department of Accounting, University of Miami, 5250 University Drive, 304 Kosar-Epstein,

Coral Gables, FL 33146-6531, United States

Abstract

This study examines the association between corporate governance mechanisms and disclosure

transparency measured by the level of Internet financial reporting (IFR) behavior. We measure corporate governance by shareholder rights, ownership structure, board composition, and audit committee characteristics. We develop a disclosure index to measure the extent of each sample firm’s

IFR by presentation format, information content, and corporate governance disclosures. Results

indicate that firms with weak shareholder rights, a lower percentage of blockholder ownership, a

higher percentage of independent directors, a more diligent audit committee, and a higher percentage

of audit committee members that are considered financial experts are more likely to engage in IFR.

The findings suggest that corporate governance mechanisms influence a firm’s Internet disclosure

behavior, presumably in response to the information asymmetry between management and investors

and the resulting agency costs. Additional exploratory analysis indicates that the association between

corporate governance and IFR varies with firm size. Our results suggest that new regulatory guidance in corporate governance leads to improved disclosure transparency via IFR.

Ó 2007 Elsevier Inc. All rights reserved.

Keywords: Internet financial reporting; Corporate governance; Disclosure transparency

*

Corresponding author. Tel.: +1 305 284 1745; fax: +1 305 284 5737.

E-mail address: yyang@miami.edu (Y.-w. Yang).

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