The impact of Directors’ attributes on IFRS fair value disclosure: an institutional perspective

Purpose: The current study investigates the impact of directors’ attributes on the extent of compliance with IFRS fair value disclosure requirements. The attributes investigated include directors’ human capital (accounting qualification) and social capital (political association), directors’ share ownership and the power distance between the CEO and the rest of the Board members.

Design/methodology/approach: The study uses disclosure analysis to measure the extent of compliance with the fair value disclosure requirements of IFRS. Ordinary least squares (OLS) regression is used to test the relationship between the disclosure score and directors’ attributes. Data were collected from the annual reports and websites of the sample companies.

Findings: Contrary to conventional belief, our findings suggest that directors’ social capital and the power distance between the CEO and the rest of the Board act as more powerful factors than directors’ human capital in explaining corporate mandatory disclosure. Specifically, our results indicate that powerful actors form a dominant coalition and co-opt influential constituents from the institutional domain to neutralize the effect of legal coercion and the accounting expertise of Board members and Big Four audit firms on the extent of compliance with institutional (fair value) rules.

Originality: The disclosure analysis contained in this study represents the first comprehensive analysis of the extent of compliance with the fair value disclosure requirements of IFRS. Furthermore, this study considers the impact of directors’ social capital and finds that it is a more powerful determinant of the extent of compliance with IFRS as compared to human capital.