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ABSTRACT:
Recent changes in the regulatory environment of the London Stock Exchange are aimed at prohibiting selective disclosure and enhancing the credibility of reporting. Using an innovative 143-item disclosure checklist, we examine corporate Internet reporting (CIR) comprehensiveness and Its determinants within this new regulatory environment. We also extend the literature linking corporate governance measures to CIR. Our findings indicate that despite this new regulatory environment, there is considerable room for improvement in CIR by London-listed companies. For example, our sample companies provide only 58 percent and 70 percent, respectively, of the credibility and usability items assessed by our comprehensiveness index. After controlling for size, profitability, industry, and high growth/intangibles, we find the CIR comprehensiveness of London-listed companies is associated with analyst following, director holding, director independence, and CEO duality. Because prior research indicates the U.K. leads Europe in Internet reporting, our results may shed light on how CIR will evolve throughout Europe.
Keywords: corporate Internet reporting; selective disclosure; voluntary disclosure; timeliness of reporting; credibility of reporting; usability of Internet disclosures.
Data Availability: Contact Professor Bryant at: [email protected]
I. INTRODUCTION AND MOTIVATION
The Internet provides a unique form of corporate voluntary disclosure that enables companies to provide information instantaneously to a global audience. However, despite its growing importance as a source of corporate information to investors, the content, usability, and perceived credibility of the information provided on corporate websites varies greatly. Research reveals that even companies headquartered in countries traditionally known for high levels of "hard copy" disclosure, such as the United Kingdom (U.K.), tend to fall short of their potential in regard to the quantity of information provided on the Internet and the level of sophistication of Internet utilization (Lymer 1999).
In this paper, we examine the association between the comprehensiveness, usability, and credibility of corporate Internet reporting (CIR) disclosures and corporate governance measures for a sample of 110 London-listed companies. Our analysis is motivated primarily by recent changes in the regulatory environment of the London Exchange directed at, inter alia, addressing the concerns of U.K. and European Union (EU) regulators prohibiting selective disclosure and the regulators' desire to enhance the credibility of reporting. The Financial Services and Market Act of 2000 highlights the U.K. government's desire to overhaul financial market regulations and...