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INTRODUCTION
Corporate governance has been in the spotlight for the past decade, often for negative rather than positive reasons. Numerous scandals, such as those involving Enron, WorldCom and Adelphia (in the United States), Nortel and Crocus (in Canada) and Parmalat and Royal Ahold (in the EU), exposed failures in corporate governance that shook the capital markets in developed countries. They also drew attention to weak corporate governance in developing, emerging and transnational economies (Bremer and Elias, 2007). Both developed and developing countries have revised corporate governance practices partly in response to these failures.
MacMillan and Downing (1999) define corporate governance as 'the mechanisms by which companies are controlled and directed'. Most research focuses on the role of corporate governance in how companies are managed and performed (Vafeas and Theodorou, 1998; Tian and Lau, 2001; Abdullah and Mohd-Nasir, 2004; Bonn, 2004; Al-Shammari, 2009), but research on the relationship of governance to corporate financial reporting is scarce.
Researchers have devoted more attention recently to the impact of corporate governance characteristics on voluntary disclosure. However, the focus has been largely on US, UK, Australian and European companies, with a few studies on large emerging economies (Forker, 1992; Ho and Wong, 2001; Cheng and Courtenay, 2006). No study has examined this topic in Middle Eastern countries in general and Kuwait in particular. Unlike the United States, the United Kingdom and Europe, where separation of ownership and control is the main form of corporate governance, Kuwaiti-listed companies are mostly controlled by families or institutional investors.
This study contributes to the literature by addressing corporate governance and voluntary disclosure in Kuwait. Voluntary disclosure deserves special attention in Middle Eastern countries because companies in this region have less incentive for transparent and frequent disclosure than their Anglo-American and European counterparts. This study extends the literature on the determinants of voluntary disclosure based on corporate governance characteristics. We seek to understand why companies disclose information in excess of requirements in a developing country where the government controls all aspects of accounting and financial reporting regulations. We believe this information will prove useful to regulators, preparers of financial statements and investors (Buzby, 1975; Meek et al , 1995). Regulators may use this information to evaluate the current corporate governance requirements and whether the...