Board connections and management commentary readability: the role of information sharing in Italy

Purpose – This study aims to determine the impact of information-sharing disseminated through the firms’ board connections on the readability of the management discussion and analysis (MD&A). Design/methodology/approach – The investigation conducted in this study is performed by using a regression analysis. The readability of the MD&A is measured by the Flesch reading ease. The level of information-sharing is determined by the degree centrality index. The sample is composed of 83 Italian-listed firms that comprise over 4,000 directors for the period 2008-2012. Findings – The main results of this study show a significant relationship between the degree centrality and MD&A readability, suggesting that board connections play a crucial role in improving the quality of external reporting. Research limitations/implications – This study uses a limited sample size. Further, we do not isolate the possible effect of other reporting incentives that may affect the readability of external reporting. Practical implications – This study argues that for a non-English-speaking country such as Italy, information-sharing is a vehicle for improving the quality of external reporting and the competitiveness of firms in international capital markets. Originality/value – This research offers an original contribution to the existent literature by highlighting the role of the firms’ board connections in determining the level of the corporate disclosure readability. This implies the opportunity for future research to take into account the firms’ board connections when they analyze related phenomena.