++A Disclosure Index To Measure The

Journal of Financial Reporting and Accounting
A disclosure index to measure the extent of corporate governance reporting by UAE

listed corporations
Mostafa Kamal Hassan
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reporting by UAE listed corporations", Journal of Financial Reporting and Accounting, Vol. 10 Iss 1 pp. 4 -
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JFRA
10,1 A disclosure index to measure the
extent of corporate governance
reporting by UAE listed
4
corporations
Mostafa Kamal Hassan
Department of Accounting, Finance and Economics, University of Sharjah,
Sharjah, United Arab Emirates and
Alexandria University, Alexandria, Egypt
Abstract
Purpose – The purpose of this paper is to examine the extent of corporate governance reporting by
United Arab Emirates (UAE) listed corporations.
Design/methodology/approach – The paper reports on the study of annual reports of 95 UAE
listed corporations representing the major economic sectors (banking, insurance, industrial and
service) in the country while crafting a corporate governance reporting index that not only advocates
the voluntary publication of corporate governance information but also stresses its underlying ethos of
public accountability and transparency.
Findings – Overall, the extent of governance disclosure is found to be similar across the major
economic sectors in the UAE. The lowest disclosures are associated with information about external
auditing and non-audit services. The highest disclosures are those dealing with management structure
and transparency, which are also found to be significantly different across the sectors in the UAE.
Research limitations/implications – The study examines the corporations’ annual reports, as this
is the only vehicle in which corporate governance information is disclosed. Future research is
recommended to include other disclosure channels such as press releases, corporations’ websites, and
online reporting.
Practical implications – The findings of this study can assist UAE regulators in formulating
corporate governance disclosure requirements. The findings also provide the international business
community insights concerning the extent of corporate governance reporting in the UAE.
Originality/value – The crafted corporate governance reporting index not only adds a quantitative
dimension advocating the voluntary publication of governance information but also considers the
socio-political context in the UAE.
Keywords Corporate governance, Disclosure index, Governance regulations, United Arab Emirates
Paper type Research paper
1. Introduction
The last few years have witnessed an increasing interest in “corporate governance”,
leading Parker (2007, p. 42) to state that “corporate governance has commanded the
highest levels of attention and debate among legislators, regulators, professions,
Journal of Financial Reporting &
business bodies, media and the general community”. Despite the significant body of
Accounting research related to corporate governance and financial reporting (Bushman and Smith,
Vol. 10 No. 1, 2012
pp. 4-33 2001; Ho and Wong, 2001; Eng and Mak, 2003; Collett and Hrasky, 2005; Dey, 2008;
q Emerald Group Publishing Limited
1985-2517
DOI 10.1108/19852511211237426 JEL classification – M41
Gandia, 2008), research in corporate governance in emerging market economies located Corporate
in the Gulf region is rare except for Hussain and Mallin (2002) (Kingdom of Bahrain), governance
Aljifri and Moustafa (2007) (UAE) and Hussainey and Al-Nodel (2008) (Kingdom of
Saudi Arabia). reporting
Hussainey and Al-Nodel’s (2008) study explores the extent to which Saudi listed
corporations publish online information related to their corporate governance practices.
Hussain and Mallin’s (2002) study analyses the state of corporate governance in Bahrain. 5
Aljifri and Moustafa’s (2007) study investigates the relationship between governance
mechanisms and the performances of UAE listed corporations’. Although this paper
shares some similarities with these studies with regards to “corporate governance in
emerging market economies”, it goes further to examine the status and the extent of
corporate governance disclosure by UAE listed corporations. This is because the UAE
regulatory transformation to force listed corporations to comply with the country’s code
of governance, makes corporate governance reporting in that emerging market an

attractive research opportunity.
Furthermore, although many corporate governance studies seek to develop
a corporate governance reporting index (Aksu and Kosedag, 2006; Chen et al., 2007;
Cheung et al., 2007; Khanchel, 2007; Dey, 2008; Haat et al., 2008; Cheung et al., 2010;
Hassan, 2010), these studies are, as Suphakasem and Weetman (2007) argue, few in
comparison with those aiming at developing financial disclosure indices in emerging
market economies. Some of these studies use the OECD principles of governance to
craft such an index (Chen et al., 2007; Cheung et al., 2007, 2010), while others rely on
Standard and Poor’s (S&P, 2004) agency framework to craft a transparency and
governance reporting index (Aksu and Kosedag, 2006; Tsamenyi et al., 2007).
For the purpose of this study a weighted corporate governance reporting index has
been crafted. The crafted index acknowledges the UAE regulatory requirements and
underscores both the OECD principles and the worldwide governance practices
discussed in prior studies. The crafted index also harmonizes international practices of
governance with the UAE code of governance in order to make the crafted index
applicable to UAE listed corporations.
As such, this paper makes several contributions to literature on corporate
governance. One of the key contributions is that in this paper, the extent of corporate
governance disclosure in an emerging market, such as the UAE is examined. This is
especially significant since the UAE has been undergoing a regulatory transformation to
force listed corporations to comply with the UAE code of governance by the end of 2010.
Another key contribution is that the paper outlines the processes taken to craft a
corporate governance reporting index that blends the UAE regulatory requirements
with worldwide governance practices while assigning a higher value to practices that
are not required by the UAE code of governance. A distinctive feature of the crafted
index is that it adds a quantitative dimension to explore whether UAE listed
corporations advocate the voluntary publication of corporate governance information.
The main research questions in this paper are as follows. First, to what extent do UAE
listed corporations comply with the UAE code of governance requirements and, at the
same time, voluntarily publish corporate governance information in their annual
reports? Second, is there a significant difference in corporate governance reporting
across the major sectors in the UAE – mainly the industrial, banking, insurance and
service sectors?
JFRA There are various reasons behind choosing the UAE. First, the UAE Security and
10,1 Commodity Market Authority (ES&CMA) issued, in 2007, a code of corporate governance
that requests UAE listed corporations to publish corporate governance information.
The UAE code of governance integrates different governance practices existing in the
country’s various regulations and guidelines such as the ES&CMA listing conditions, the
UAE Corporation Act of 1984 and the UAE Central Bank governance guidelines while, at
6 the same time, requesting the publication of more governance measures that match
worldwide governance practices. The ES&CMA expects the UAE listed corporations to
comply with the code of governance requirements by the end of May 2010. Accordingly,
the paper explores the UAE listed corporations’ “readiness” to comply with the code of
governance. It examines the extent to which the UAE listed corporations complied with
elements of that code before the due process ended by May 2010.
Second, the UAE has witnessed phenomenal economic growth over a short period of
time, and therefore the country has become a key focus for personal and institutional
investors (Obay, 2009). The country has moved from a relatively undiversified and
inward-oriented economy to an outward-oriented and diversified one. According to
Obay (2009), this rapid transformation was not followed by the adoption of proper
governance practices and standards. To date, Obay (2009) adds that no attempt has
been made to look at corporate governance practices within UAE corporations.
However, this study explores the status of UAE corporations’ corporate governance
and therefore the findings will be of interest to institutional investors, the international
investment community and the UAE regulators.
The paper is organized into six sections. Following this introduction, Section 2
discusses the underlying objectives of “corporate governance” reporting while Section 3
discusses the processes involved in crafting the corporate governance reporting index.
Section 4 presents the empirical results and a descriptive analysis of the application of the
crafted index to the UAE listed corporations, before the discussion and conclusion sections.
2. Corporate governance reporting

Following the OECD (2004, p. 11) description of the “corporate governance” features,
several studies have argued that the underlying objective of good corporate
governance is to promote transparency and public accountability (Taylor, 2000;
Solomon and Solomon, 2004; Parker, 2007; Hassan, 2008; Wei et al., 2008). The
disclosure of “corporate governance” practices not only provides investors, or as
Parker (2007) states the “general community”, with information about corporations’
ownership structure, management structure, management composition and auditing
and internal control but also enables the managers of the corporations to release
information about how they execute their responsibilities or, as Wei et al. (2008) state,
“discharge their accountability” to their stakeholders.
One of the key aspects of corporate governance reporting is what Sinclair (1995)
refers to as discharging “public accountability” (Wei et al., 2008). “Public
accountability”, as Sinclair (1995, p. 221) defines, is a form of accountability in which
managers and organizations become “more accountable to the public, interested
community groups and individuals”. Coy and Dixon (2004, p. 81) argue that public
accountability requires open disclosure to all citizens and stakeholders, who have an
opportunity to make criticisms. Coy et al. (2001) advocate the need for public
accountability-based disclosure in order to meet the information needs of a broad range
of stakeholders who have a legitimate economic, social and political interest in the Corporate
reporting organization. governance
“Transparency” is another aspect that many scholars underscore as a key element of
“good” corporate governance (Taylor, 2000; Solomon and Solomon, 2004; Cheung et al., reporting
2010). Barth and Schipper (2008) argue that “transparency” is the extent to which financial
reports reveal how corporations’ managers discharge their responsibilities in a way that is
readily understandable by those using the financial reports. Parker (2007) points out that 7
corporate governance reporting involves more than compliance with legal requirements. It
incorporates, he adds, the voluntary disclosure of information related to wider
organizational issues such as management processes, investors’ rights, ownership
structure and any other information that discharges corporate management responsibilities.
One can argue that the underlying ethos behind corporate governance reporting
relies on public accountability and transparency. Since the study has crafted a corporate
governance reporting index, this ethos should be acknowledged in it. Corporate

governance reporting, as Parker (2007) argues, involves more than compliance with
regulatory requirements and therefore in the crafted index higher values are assigned to
the voluntary disclosure of information related to corporate governance while lower
values are assigned to the disclosed governance measures that are legally required –
i.e. required by the UAE code of governance.
The crafted corporate governance reporting index in this paper ensures that the
communication of comprehensive information that enables organizations’ managers to
discharge their public accountability and enhance corporations’ transparency is
included. It is assumed that the crafted index will enable the exploration of the ethos, or
as Haat et al. (2008) argue the “substance over form”, of governance rather than merely
the application of a “box-ticking” approach in order to demonstrate compliance with
governance legislations. The study examines the extent of corporate governance
disclosure by UAE listed corporations that are undergoing transitional processes
towards better corporate governance. The next section discusses the rigorous
processes behind the crafting of the corporate governance reporting index.
3. Crafting the corporate governance disclosure index

The paper shares the concern of other studies for the need to craft corporate
governance reporting indexes. As such, for the purpose of this study, such an index has
been crafted in the light of the UAE regulatory requirements. The crafted index is
based on four sources:
(1) the OECD Principles of Corporate Governance (OECD, 2004);
(2) the UAE code of corporate governance;
(3) the UAE corporations’ governance practices as published in their annual
reports; and
(4) prior research that addresses corporate governance disclosure (Haniffa and
Cooke, 2002; Aksu and Kosedag, 2006; Chen et al., 2007; Cheung et al., 2007, 2010).
The process to craft the corporate governance reporting index was carried out in three
stages.
During the first stage, the categories and items for the index were selected. This
involved selecting the initial items for the index, categorizing these items and, finally,
JFRA modifying the index in accordance with the UAE regulatory framework. During stage
10,1 two the items in the index were classified into mandatory and value-adding items and
then the crafted index was checked against the UAE listed corporations’ annual
reports. Finally, during, stage three, how the various items incorporated into the
crafted index are to be weighted were designed. The following subsections present the
rigorous processes applied in crafting the governance reporting index.
8
3.1 Stage one: selection of items
During this stage, previous studies were reviewed in order to select potential items to
be included in the index. These included studies by Gallagther (2002), Aksu and
Kosedag (2006), Cheung et al. (2007), Tsamenyi et al. (2007), Gandia (2008), Haat et al.
(2008), Hussainey and Al-Nodel (2008) and Kelton and Yang (2008). Then the these
potential items were classified based on a scheme that matches the OECD categories:
(1) rights of shareholders and ownership structure;

(2) equitable treatment of shareholders;
(3) role of stakeholders;
(4) disclosure and transparency; and
(5) board responsibilities and composition.
The categories and potential items in the index were checked against the UAE code of
governance requirements. This checking process helped to modify the categories and
items in the index so as to harmonize the index with the UAE regulatory requirements
(see Appendix 1 for sources of potential items).
The modification processes led to: first, combining two of the OECD categories
(rights of shareholders/ownership structure and equitable treatment of shareholders);
second, eliminating the category of the role of stakeholders; and, finally, adding a new
category labelled “external auditing and non-audit services”. There are several reasons
behind these modifications. First, the UAE code of corporate governance requests
every UAE corporation to disclose information about external auditors such as audit
fees, reappointment policies and any other information related to non-audit services
performed by the external auditor (UAE code, 2007, Article 14). Second, the UAE code,
Article 12, highlights the importance of publishing information related to investors’
right and ownership structure in the same section.
Finally, although the code emphasizes the role of stakeholders, the concept of
stakeholders is broad, incorporating owners, management, employees and others
(Boesso and Kumar, 2007). To avoid duplication, items identifiable with different
stakeholders were assigned to the modified categories in the index since these categories
represent the majority of stakeholders. These modifications are believed to make the
index applicable to UAE corporations. The modified index includes a total of 47 items
distributed across four categories in the index in the following order:
(1) ownership structure and investors’ relations/rights (ten items);
(2) board and management structure/processes (16 items);
(3) external auditing and non-audit services (six items); and
(4) transparency disclosures (15 items) (see Appendices 1 and 2 for preliminary
index A).
3.2 Stage two: classifying the index items – mandatory and value-adding items Corporate
The disclosure of corporate governance practices can be divided into mandatory and governance
voluntary disclosure. Cheung et al. (2010) argue that there are strict regulatory
requirements for mandatory disclosure, yet more voluntary disclosure increases a reporting
corporation’s transparency and consequently reduces information asymmetry between
insiders and outsiders. Since the underlying objectives of corporate governance are to
improve a corporations’ public accountability and boost transparency, Haat et al. (2008) 9
argue that in the disclosure of corporations’ corporate governance practices, it is better
to include both basic and quality governance measures. Basic governance measures, as
defined by Haat et al. (2008) define, are those measures mandatorily required by a code
of governance. Quality governance measures, they add, represent the voluntary
disclosure of practices adopted by reporting corporations.
Al-Razeen and Karbhari (2004) go on to classify disclosure index items into three
categories: first, mandatory items, second, voluntary items that are closely related to
mandatory disclosure and, finally, voluntary items that are not closely related to
mandatory disclosure. Al-Razeen and Karbhari (2004) argue that this distinction enables
the exploration of whether a corporation is complying with the minimum disclosure
requirements, exceeding the requirements or disclosing some information that has no
close relationship to the mandatory requirements. The distinction, Al-Razeen and
Karbhari (2004, p. 352) state, also “enables the crafting of a practical disclosure index
that reduces the degree of subjectivity”. It also enables researchers, they add, to consider
the socio-political context of the country concerned.
In line with the above studies, the modified index of 47 items was divided into two
broad categories. The first category includes items that are mandatorily required by
the UAE code of governance (23 items). These items are labelled as “mandatory items”
and distributed across the modified index in the following order:
(1) ownership structure and investors’ rights (three items);
(2) board and management structure/processes (13 items);
(3) external auditing and non-audit services (three items); and
(4) transparency disclosures (four items) (see Appendix 2 for preliminary index
A and Appendix 3 for pattern of items across the major categories in the index).
The second category includes items that are recommended by prior studies (24 items),
although these items are not required by the UAE code of governance. These items are
labelled as “value-adding” items. They represent, as Haat et al. (2008) argue, the
corporations’ voluntary disclosure of governance information outside the UAE code of
governance requirements. The value-adding items are distributed across the modified
index in the following order:
(1) ownership structure and investors’ rights (seven items);
(2) board and management structure/processes (three items);
(3) external auditing and audit services (three items); and
(4) transparency and disclosure (11 items) (see Appendix 2 for preliminary index A
and Appendix 3 for pattern of items across the index categories).
The UAE listed corporations’ annual reports were then examined against the modified
governance reporting index containing the 47 items. This examination process lead to:
JFRA first, the elimination of items scored 0 or disclosed by fewer than four corporations,
10,1 second the modification of some items in the light of governance information published
in the UAE corporations’ annual reports and, finally, the addition of items practiced,
i.e. applied, by the UAE corporations but not included in the index (see Appendix 2 for
final index B). Accordingly, the final crafted index, after having been checked against
annual reports, incorporated 42 items distributed across the index categories in the
10 following order:
(1) ownership structure and investors’ rights (11 items);
(2) board and management structure and processes (ten items);
(3) external auditing and audit services (four items); and
(4) transparency and disclosure (17 items) (see Appendix 3 for pattern of items
across the index categories).
The final corporate governance reporting index, comprising 42 items, consists of

mandatory items required by the UAE code of governance as well as value-adding
items. The value-adding items are classified into two groups: first, items recommended
by prior studies and, second, items published (i.e. disclosed) in the UAE corporations’
annual reports, although these items are neither required by the UAE code of
governance nor recommended by prior studies (see Appendix 3 for pattern of items
across the index categories). The paper considers the publication of governance
measures beyond the UAE code of governance requirements as value-adding measures
(Appendix 2) since the code is in harmony with the country’s other regulations such as
the Corporation Act of 1984, the ES&CMA listing conditions and the UAE Central
Bank guidelines (UAE Code of Governance 2007; GLG, 2009).
Some of the value-adding governance measures, particularly those published
(i.e. disclosed) by UAE corporations and not directly mentioned in the initial index of
47 items (see Appendix 2 for final index B), could be closely related to the country’s
other regulations such as the ES&CMA listing conditions and the Corporation Act of
1984. Although these items are considered as value-adding ones yet they are assigned a
lower weight in comparison with governance items as recommended by prior studies
when crafting the governance reporting index.
Items not required by the UAE code and recommended by prior studies are
considered as value-adding items that match worldwide practices and therefore these
items are assigned the highest weight when crafting the governance reporting index
(Appendix 2). The governance reporting index items, as utilized in this study, are
classified into three groups: first, mandatory items, second, value-adding items
recommended by prior studies and finally value-adding items practiced (i.e. disclosed)
by UAE corporations. This enables, as Al-Razeen and Karbhari (2004) suggest, the
blending of the UAE corporations’ governance practices with mandatory and
worldwide voluntary practices in a coherent corporate governance reporting
framework while addressing the socio-political context of the country that is the
subject of this study.
3.3 Stage three: item weightings

One of the key aspects of governance reporting index studies is that they attempt to
examine both the quantity and the quality of governance disclosure. Some studies
use survey questions (Hussain and Mallin, 2002; Cheung et al., 2007), while others rely
on a weighting/unweighting approach to some predetermined disclosure items Corporate
(Haniffa and Cooke, 2002; Khanchel, 2007; Haat et al., 2008; Cheung et al., 2010). governance
Questionnaire surveys and unweighted disclosure index studies tend to provide a
dichotomous measure of “yes/no” or a binary scale that notes the presence or absence of reporting
a certain item. However, for the purpose of this study, a corporate governance
disclosure index was developed wherein every individual disclosure item can be
evaluated based on the importance of each item in the light of the underlying ethos of 11
public accountability and transparency in corporate governance.
For the purpose of analyses, the importance of each item is measured based on the
source that recognizes the item. If the item is required by the UAE code of governance,
i.e. a mandatory item, then the item is given a score of 1. If the item is practiced,
i.e. disclosed, by UAE listed corporations (value-adding items that emerged from
examining annual reports) then it is given a score of 2 and the item is given a score of
3 if it is recommended by prior studies (value-adding items recommended by prior

studies). The item will be given a score of 0 if the corporation does not report that item.
Based on this weighting scheme, the total score in the final corporate governance
reporting index is 91 and is distributed across the four categories in the index as shown
in Table I. Table I shows each category code as utilized in the statistical analysis,
category label, and total maximum score.
The governance disclosure items are weighted in this way for several reasons. First,
UAE listed corporations have been going through transitional processes to implement
corporate governance regulations by the end of May 2010. These transitional processes
make it difficult to obtain information about the importance, i.e. weighting, of corporate
governance items through other research methods such as questionnaires and
interviews (Hussainey and Al-Nodel, 2008). Second, following financial disclosure
studies that capture the importance of disclosed items by adopting a weighting
approach (Beattie et al., 2004; Coy and Dixon, 2004; Hasseldine et al., 2005; Wei et al.,
2008; Cheung et al., 2010), the importance of the items are measured according to a
scoring system of “1”, “2” and “3” in addition to a score of “0” for non-existence. This
measurement adds a quantitative dimension to explore whether UAE listed
corporations advocate the voluntary publication of corporate governance information.
Finally, the scoring system is in harmony with financial disclosure studies that
suggest “the more information that annual reports contain, especially voluntary
information, the greater will be the degree of the corporation’s informative
transparency” (Gandia, 2008; Cheung et al., 2010, p. 260). The highest score, given to
value-adding items recommended by prior studies, is based on the assertion that these
items represent the highest possible extent of voluntary disclosure. The lowest score,
given to mandatory items, is based on the assertion that these items show compliance
with the minimum disclosure requirements. The middle score, given to value-adding
Category code Category label Total maximum score
TG1-24 Ownership structure and investors’ rights 24 Table I.

TG2-17 Management structure and processes 17 The index’s four
TG3-8 External audit and non-audit services 8 categories: codes, labels
TG4-42 Transparency disclosures 42 and total maximum
T. score Corporate governance reporting total score 91 scores
JFRA items published by UAE corporations, is based on the assertion that these items exist
10,1 outside the UAE code of governance yet they seem to be closely related to the other
regulatory requirements such as the UAE Corporation Act of 1984, the UAE Central
Bank guidelines and the Emirates Security and Commodity Market Authority
(ES&CMA) listing conditions that require the preparation of annual reports in
accordance with International Financial Reporting Standards (IFRS).
12 In this study, a rigorous process has been applied in crafting the governance index
for various reasons. First, this rigorous process enables the exploration of whether
UAE corporations advocate the ethos, or as Haat et al. (2008) argue uphold “substance
over form”, of the principle of governance rather than merely applying a “box-ticking”
approach in order to demonstrate compliance with governance legislation. Second, it
not only enables the development of a governance disclosure index that is comparable
with those indices utilized in previous studies, but also makes such an index applicable
to UAE corporations. Third, it highlights the importance of the underlying objectives

of public accountability and transparency in corporate governance, which include both
voluntary and mandatory disclosure requirements.
Despite this rigorous process, identifying governance index potential items and
scoring the importance of these items remain inherently subjective and can be
controversial (Marston and Shrives, 1991). The existence of various governance
disclosure frameworks, such as OECD and S&P, unintentionally induces researchers to
attach different weights to these frameworks. These weights introduce further
subjectivity when researchers select the potential items for an index. As such, the
study aims at reducing this potential subjectivity by applying the above rigorous
processes and consulting previous studies related to crafting disclosure indices.
4. Empirical study
4.1 Sample
For the purpose of this study, a sample of 102 corporations listed on the Dubai financial
market and the Abu Dubai securities market were selected. To craft the corporate
governance reporting index, annual reports incorporating the financial statements,
shareholders’ annual general meeting reports, management report, chairman’s report
and information published by the ES&CMA about these corporations for the year 2008
were examined. The annual reports for the year 2008 were chosen because they are
relatively more recent. The financial reports as of 31 December 2008 were obtained by
accessing corporations’ web sites. To maintain homogeneity of the sample
corporations, non-UAE corporations (n ¼ 7) were removed. Accordingly, the total
number of potential UAE listed corporations (total population) was reduced to 95. This
total population was then classified into four sub-samples depending on the ES&CMA
industry classification as follows:
(1) industrial (n ¼ 24);
(2) insurance (n ¼ 26);
(3) banks (n ¼ 20); and
(4) service (n ¼ 25) corporations.
The study relies on the ES&CMA industry classification as an objective criterion to

decide on the sector to which a corporation belongs. Nevertheless, the ES&CMA
clusters financial service institutions together with other service corporations such as Corporate
telecommunication and property management, a matter that has an implication for the governance
empirical findings as will be explained later in the empirical study. The issue of
industry classification and its implications for the empirical findings go beyond the reporting
scope of the current paper and represent an area for future research.
4.2 Descriptive analysis

13
Table II presents a descriptive analysis of the corporate governance reporting index
for the sample of the 95 UAE listed corporations. The analysis in Table II suggests that
the majority of UAE listed corporations disclose corporate governance information
in their annual reports. It also shows a variation in corporate governance reporting
across the four categories of the index for the sample of the 95 corporations. The highest
and lowest total scores for governance reporting are 81 and 25, respectively.
In order to undertake a closer investigation, a comparative analysis across the four
sub-samples (i.e. sectors) was carried out as shown in Table III. It shows the corporate
governance-related disclosure variation across the reporting of the four categories in
the index among the UAE sectors. It presents the maximum (max.), the minimum
(min.) and the mean (mn) values, across the UAE sectors of the corporate governance
index categories and the total scores for corporate governance reporting.
Table III shows that the lowest total score for corporate governance reporting is
found in the service sector while the highest total score is found in the banking sector.
TG1-24 TG2-17 TG3-8 TG4-42 T. score
Valid n 95 95 95 95 95
Missing n 0 0 0 0 0
Mean 15.66 6.46 6.35 22.33 50.79
Median 16.00 7.00 7.00 23.00 51.00
SD 3.533 3.083 1.700 5.622 10.590
Variance 12.481 9.507 2.889 31.605 112.147 Table II.
Range 18 14 7 28 56 Descriptive statistics of
Minimum 6 1 1 10 25 the governance index
Maximum 24 15 8 38 81 for the sample
Industry (n ¼ 24) Banking (n ¼ 20) Insurance (n ¼ 26) Service (n ¼ 25)

Min. Max. Mn Min. Max. Mn Min. Max. Mn Min. Max. Mn
TG1-24 11 24 15.79 7 23 16.95 8 21 14.15 6 21 16.08

TG2-17 2 11 5.46 2 15 8.25 2 12 6.62 1 11 5.84
TG3-8 4 8 6.42 4 8 6.60 1 8 5.77 3 8 6.68
TG4-42 12 23 19.46 14 38 25.50 12 33 21.92 10 35 22.96
T. score 35 60 47.13 28 81 57.30 32 71 48.42 25 67 51.56
Table III.
Notes: TG1-24 – ownership structure and investors’ rights; TG2-17 – management structure and Descriptive statistics of
processes; TG3-8 – external audit and non-audit services; TG4-42 – transparency disclosures; sectors’ governance
t. score – corporate governance reporting total score reporting
JFRA The highest scores in governance disclosure are found in the industry sector (TG1-24)
10,1 and the banking sector (TG2-17) and (TG4-42). The highest score in this category
(TG3-8) is similar across the four sectors. Meanwhile, the lowest scores in governance
disclosure are found in the service sector (TG1-24) (TG2-17) and (TG4-42) and
the insurance sector (TG3-8). This indicates that there is a variation in corporate
governance-related disclosure among the UAE sectors. The following section explores
14 whether that variation is significant or otherwise.
4.3 Variations between sectors

An ANOVA test was applied to find out whether there is a significant difference
among the UAE sectors (industrial, banking, insurance and service sectors).
The ANOVA test results are presented in Table IV. The test shows that there are
significant differences among the sectors for the governance index categories of
ownership structure and investors’ rights (TG1-24), management structure and
processes (TG2-17) and transparency and disclosure (TG4-42) at the 0.05 level. The test
also shows that there is a significant difference among sectors for the corporate
governance disclosure total score (t. score) at the 0.05 level of confidence.
There was no difference in one category, that is, “external auditing and non-audit
services” (TG3-8), among the UAE sectors. This result means that all UAE listed
corporations publish similar information related to that category. Exploring the items
incorporated into that category shows that UAE listed corporations disclose
information related to the external audit name, fees, the eligibility of the auditor
reappointment and audit results (Appendix 2). However, other information related to
“whether the corporation had non-audit services or otherwise” is not disclosed by most
of the UAE listed corporations.
Then the ANOVA test multiple comparison was utilized – Tukey, at the 0.05 level
of confidence – to explore how significant the disclosure difference is between each
pair of sectors across the corporate governance reporting index categories. The test
shows no significant difference between each pair of sectors for the “external auditing
and non-audit services” category (TG3-8). Table V presents the ANOVA – Tukey test
Sum of squares df Mean square F Sig.
TG1-24 Between groups 97.088 3 32.363 2.737 0.048

Within groups 1,076.133 91 11.826
Total 1,173.221 94
Within groups 795.222 91 8.739
Total 893.621 94
Within groups 258.689 91 2.843
Total 271.537 94
Within groups 2,557.764 91 28.107
Table IV. Total 2,970.884 94
ANOVA test for T. score Between groups 1,330.458 3 443.486 4.381 0.006
governance disclosure Within groups 9,211.331 91 101.223
total score and categories Total 10,541.789 94
Corporate
95% confidence interval
Dependent (I) SEC ( J) SEC Mean difference Lower Upper governance
variable code code (I-J) SE Sig. bound bound reporting
TG1-24 Industry Banks 21.158 1.041 0.683 2 3.88 1.57
Insurance 1.638 0.973 0.339 2 0.91 4.19
Service 20.288 0.983 0.991 2 2.86 2.28 15
Banks Insurance 2.796 * 1.023 0.037 0.12 5.47
Service .870 1.032 0.834 2 1.83 3.57
Insurance Service 21.926 0.963 0.196 2 4.45 0.59
TG2-17 Industry Banks 22.792 * 0.895 0.013 2 5.13 20.45
Insurance 21.157 0.837 0.513 2 3.35 1.03
Service 20.382 0.845 0.969 2 2.59 1.83
Banks Insurance 1.635 0.879 0.253 2 0.67 3.94
Service 2.410 * 0.887 0.039 0.09 4.73

TG3-8 Industry Banks 20.183 0.510 0.984 2 1.52 1.15
Insurance 0.647 0.477 0.530 2 0.60 1.90
Service 20.263 0.482 0.947 2 1.52 1.00
Banks Insurance 0.831 0.501 0.353 2 0.48 2.14
Service 20.080 0.506 0.999 2 1.40 1.24
TG4-42 Industry Banks 26.042 * 1.605 0.002 2 10.24 21.84
Insurance 22.465 1.501 0.360 2 6.39 1.46
Service 23.502 1.515 0.103 2 7.47 0.46
Banks Insurance 3.577 1.577 0.113 2 0.55 7.70
Service 2.540 1.590 0.385 2 1.62 6.70
T. score Industry Banks 210.175 * 3.046 0.007 2 18.15 22.20
Insurance 21.298 2.848 0.968 2 8.75 6.16
Service 24.435 2.875 0.417 2 11.96 3.09
Banks Insurance 8.877 * 2.992 0.020 1.05 16.71
Service 5.740 3.018 0.235 2 2.16 13.64
Insurance Service 23.137 2.818 0.682 2 10.51 4.24 Table V.
ANOVA test multiple
Note: *The mean difference is significant at the 0.05 level comparisons – Tukey
results for the other disclosure categories (TG1-24, TG2-17, TG4-42 and t. score), which
were found to be significantly different between each pair of sectors.
Table V shows that there are significant differences between the industrial and the
banking sectors and between the banking and the service sectors for the management
structures and processes category (TG2-17). Table V also shows that there are significant
differences between the industrial and the banking sectors for the transparency
disclosures’ category (TG4-42) and between the banking and the insurance sectors for
ownership structure and investors’ rights (TG1-24). Table V also shows that there are
significant differences between the industrial and the banking sectors and between the
banking and the insurance sectors for the corporate governance reporting (t. score).
4.4 Discussion
Corporate governance reporting differs across the major sectors in the UAE. The result
of the ANOVA test shows significant differences between the industrial and the
JFRA banking sectors and between the banking and the insurance sectors for corporate
10,1 governance reporting (t. score). Although the different sectors in the UAE operate
under the same regulatory framework, each UAE sector has to comply with different
regulations and has different guidelines for publishing corporate governance
information. The banking sector significantly differs from: the insurance sector
(TG1-24 and t. score), the industry sector (TG2-17, TG4-42 and t. score) and the service
16 sector (TG2-17) at the level of 0.05. The positive signs for the differences indicate that
the banking sector publishes more governance-related information. One possible
explanation is that the banking sector follows the UAE Central Bank guidelines in
addition to the UAE code of governance[1].
The UAE Central Bank provides a set of corporate governance guidelines and
regulations for UAE bank directors. On the one hand, the UAE Central Bank urges
UAE bank directors to follow certain governance guidelines, according to the Central
Bank governor. These guidelines enable bank directors to have more time for strategic
decisions, policy-making decisions and effective risk management (IFC-UAE Central
Bank, 2006). These guidelines highlight:
.
the importance of open disclosure and transparency;
. the benefits of appointing non-executive directors; and
.
the necessity of having independent board committees such as an audit committee,
remuneration committee and Board of Directors’ nomination committee.
On the other hand, the UAE Central Bank regulations require all banks to prepare their
financial reports in accordance with IFRS (IOSCO UAE, 2007; Hassan, 2009). These
regulations also oblige banks to comply with the Basel II standards’ requirements that
involve the publication of information related to capital adequacy. The UAE Central
Bank requirements and guidelines reinforce the publication of information related to
governance practices of banks introduced under the UAE code of governance. This
encourages and puts pressure on the directors of the bank to publish more information
related to corporate governance practices.
The UAE Central Bank puts more pressure on the financial sector to comply with
the UAE code of governance, which includes governance dimensions similar to those
outlined in the UAE Central Bank requirements and guidelines. The UAE Central Bank
strengthens the compliance with the UAE code of governance yet it does not request
the publication of a different set of governance measures beyond the UAE code of
governance requirements except for capital adequacy. The capital adequacy measure
is disclosed by UAE financial institutions and, at the same time, matches international
best practices. Therefore, in this study a score of 2 is assigned to that measure since it
is practiced, i.e. disclosed, in alignment with the international best practices required
by the Basel II standards. Accordingly, the measure seems to align with those
classified as closely related to the country’s regulations.
The empirical results also show that there is no significant difference between
banks and service corporations except for management structure and processes
(TG2-17). One possible explanation is that the study relied on the ES&CMA industry
classification to decide on the sector to which a corporation belongs. The ES&CMA
classification considers financial service institutions, fund and investment
management institutions and finance houses as service corporations, yet these
institutions are subject to the Central Bank regulatory requirements. The ES&CMA
classification places these financial institutions alongside other service corporations Corporate
such as telecommunication, food and drink and property management and governance
development. Accordingly, there was no significant difference between:
.
the industrial sector and the service sector for any of the index categories; and
reporting
.
the banking and the service sector except for management structure and
processes (TG2-17).
17
Nevertheless, Table V shows negative signs for the disclosure difference across
different categories between the industrial sector and the service sector, a matter that
indicates that the industrial sector reports less governance information than the service
sector. A possible explanation behind this result is that some of the service
corporations, as explained earlier, are financial institutions. Since these institutions
are subject to Central Bank requirements, they are pressurized to publish more
governance-related information than the industrial sector. Although both sectors are
subject to the UAE regulatory framework requirements, the industrial sector is less
pressurized since it does not have to comply with the UAE Central Bank requirements.
Likewise, Table V also shows positive signs for the disclosure difference
between the banking sector and the service sector across three of the categories in the
index and the total index (TG1-24; TG2-17; TG4-42; and t. score). These positive signs
indicate that the banking sector publishes more governance-related information than
the service sector, yet that incremental disclosure is not significant except for category
(TG2-17). These disclosure differences raise further questions concerning how the
industrial sector and the service sector can improve their governance reporting in
alignment with the banking sector. These questions go beyond the scope of this study
and represent an area for future research.
The process of crafting the governance reporting index shows that some of the UAE
code of governance requirements are not published in the UAE annual reports (see
Appendix 2 for the final index). These items are as follows:
(1) Description of the company approval of rules of governance.
(2) Description of rules related to directors’ transactions in securities.
(3) Public disclosure of offices held by any independent director in other
corporations.
(4) Information on Board of Directors (independent – non-executives)
qualifications and experience.
(5) Explicit description of conditions determining the independence and being
non-executive of directors.
(6) The number of the Board of Directors’ meetings held during the year.
(7) The directors’ attendance in person at the meetings of the Board of Directors.
(8) The separation of the chairman and CEO positions.
(9) Explicit description of the relations between directors and other individuals
(relative or non-relative) that cause a conflict of interest.
(10) Information on non-audit services provided by an audit firm and/or group
undertakings (fees for non-audit services).
(11) Publication of an annual corporate governance report.
JFRA The index-crafting process also shows that some worldwide items, which are
10,1 recommended by previous studies, are not disclosed by the majority of the UAE
corporations (see Appendix 2 for the final index). These include the following:
.
Interests (number of shares) held by directors in share capital.
.
List of and number (percentage) of shares held by major shareholders.
18 . Information about share voting and voting agreements.
.
Notes on appointments of independent professional advisor(s).
The above findings have three policy implications. First, the findings highlight to
the UAE regulators the need to check on the missing mandatory items and formulate
disclosure requirements for listed corporations regarding these items. Second, the
study compares the UAE listed corporation practices with the worldwide practices
recommended by prior studies. To recall, Appendix 1 draws a comparison between the

UAE code of governance requirements and the worldwide governance practices
suggested by prior studies. This comparison highlights a legislation gap between the
UAE code requirements and the worldwide recommended governance practices.
Furthermore, checking the crafted index against the UAE listed corporations’ annual
reports shows that some worldwide governance practices incorporated into the crafted
index are not disclosed by these corporations, i.e. a practice gap, and therefore UAE
listed corporations are recommended to apply these practices and incorporate
information about these practices into their annual reports.
One can argue that the index-crafting processes highlight to the UAE policy makers
the need to address the legislation gap and the practice gap. The former represents the
difference between the UAE code practices and the worldwide governance practices
recommended by prior studies. The latter represents the difference between the crafted
index items, drawn from the UAE code and worldwide practices recommended by
prior studies, and the information published about these items in the UAE listed
corporations’ annual reports. Addressing these gaps may encourage institutional
investors and the international investment community to invest in the UAE.
Finally, the findings of this study show that the UAE code of governance drives
corporate governance practices in the UAE. Yet professional associations, business
forums and leading businesses need to play a bigger role to improve the practice of
governance in the UAE. This is another important issue that UAE policy makers need
to address in order to improve the practice of corporate governance.
5. Conclusion, limitations and future research

The paper adds to the literature on corporate governance. At the same time, it explores
the status and the extent of corporate governance reporting in the UAE, an emerging
economy market, which is undergoing a regulatory transformation to force listed
corporations to comply with the UAE code of governance by the end of 2010. On the other
hand, the crafted governance reporting index blends the UAE regulatory requirements
with worldwide governance practices while adding a quantitative dimension to explore
whether the UAE corporations advocate the voluntary publication of corporate
governance information. The findings of this study can assist the UAE regulators,
institutional investors, and international investment community to understand the status
of the corporate governance in the UAE and the areas that need improvement.
There are, however, several limitations to this study. However, these limitations Corporate
present opportunities for future research. Annual reports have been used as the only governance
vehicle to disclose corporate governance-related information and consequently
discharge managers’ public accountability. The main assumption is that annual reporting
reports represent a key document for public accountability and transparency since
these reports should contain comprehensive details of all the aspects of business
operations. Future research could extend this study by examining corporate 19
governance disclosures including other disclosure channels such as press releases,
corporations’ web sites, financial analysis and online announcements.
A further limitation lies in the subjective nature of crafting a reporting index.
Although every effort was made to minimize this subjectivity, Marston and Shrives
(1991, p. 208) argue that that subjectivity “cannot be completely removed, nor it is
expected that it can be” when crafting disclosure indices. The study has minimized the
research subjectivity by, as Al-Razeen and Karbhari (2004) suggest, reviewing

international practices, consulting prior studies and considering the socio-political
context of the UAE.
Although the study relies on the ES&CMA industry classification to assign listed
corporations to the four sectors – industry, banking, insurance and service, covered in
the study, the ES&CMA classification considers financial and investment institutions
as service corporations. Future research can classify the sample population into
financial and non-financial sectors and examine whether there is a significant
difference in corporate governance reporting between these two sectors.
The study also provides directions for future research on corporate governance and
disclosure. First, the main objective of this study was to craft a governance
reporting index. Further analysis is needed to explore the different factors that cause
the variation in the level of corporate governance disclosure. Second, the study relies on a
weighted index. The weighting scheme depends on whether the index items are
mandatory or value-adding ones. Further research is needed wherein the weighting of
items depends on the opinion of various stakeholders. Further investigation that explores
the relationship between the level of governance disclosure and corporations’
accounting-based performance measures is also an area for future research. Finally, the
study suggests that the crafted index be applied on a sample of UAE listed corporations’
annual reports published by the end of 2010 or thereafter. This application will enable the
exploration of the improvement in governance reporting by UAE corporations after the
transitional process towards adopting the code governance has been completed.
Note
1. Using an unweighted approach in the statistical analysis shows a significant difference between
the bank and the insurance sector regarding TG2 (management structure and processes).
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22
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About the author

Dr Mostafa Kamal Hassan is an Associate Professor in Accounting at the University of Sharjah,
UAE. He received his PhD from the University of Essex, UK, in 2003. He has worked at the
University of Hertfordshire, UK and University of Portsmouth, UK and he is currently on leave
from Alexandria University, Egypt. He has published in the Journal of Accounting
& Organizational Change, Managerial Auditing Journal, Research in Accounting in Emerging
Economies and International Journal of Behavioural Accounting and Finance. His research
interests include the sociological analysis of accounting practices, institutional theory and
accounting change, risk disclosure and corporate governance. Mostafa Kamal Hassan can be
contacted at: mhassan@sharjah.ac.ae
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The UAE Aksu Collett Hussainey

code (2007 Cheung and and Tsamenyi Haat and
amended Gandia et al. Kosedag Hrasky Gallagther et al. et al. Al-Nodel Kelton and Yang
2009) (2008) (2007) (2006) (2005) (2002) (2007) (2008) (2008) (2008)
Appendix 1
Category 1 items: ownership structure and investor relations/rights

1. Interests (no. of shares)
held by directors in
share capital X X X X
2. List of and number
(percentage) of shares
held by major
shareholders X X X X X
3. Describe the company
approval of rules
governing directors’
transactions in
securities X X X X X X
4. Mention/details of
articles of association
(Articles of
Incorporation) X
5. Related party
transactions X X X X X
6. Treasury stock held by
the company X X X X
7. Description of share
classes X X
8. Notice of change in
substantial holdings X X X
9. Dividends X
10. Information about share
voting and voting
agreements X
(continued)
reporting
governance
Sources of the corporate

Corporate
index’s potential items

governance reporting
Table AI.
23
24
10,1
JFRA
Table AI.
2009) (2008) (2007) (2006) (2005) (2002) (2007) (2008) (2008) (2008)
Category 2 items: board and management structure/processes

1. Board members X X X X X X X X X
2. Board structure X X X X X X X
3. Information on BOD
(independent – non-
executives)
qualifications and
experience X X X X X X X X
4. Term in office X X X X X X
5. Change in BOD –
selection, de-selection
and re-election
procedures of BOD
members X X X X X
6. Explicit description of
conditions determining
the independence and
being non-executive of
directors X X X X X X
7. Public disclosure of
offices held by any
independent director in
other companies X X X X X
8. Details of director
remuneration X X X X X X X X
9. State the no. of the
Board of Directors’
meetings held during
the year X X X X
(continued)

2009) (2008) (2007) (2006) (2005) (2002) (2007) (2008) (2008) (2008)
10. State the directors’

attendance in person at
the meetings of the
BODs X X X
11. Describe the functions
and competencies of the
BOD and delegated
management X X X X X X
12. List of board
committees – audit,
remuneration,
remuneration, risk
management and
governance committees X X X X X X X X
13. Explicit description of
relations between
directors and other
individuals (relative or
non-relative) that cause
a conflict of interest X X X X X
14. Separation of chairman
and CEO X X X X X X
15. Description of how the
BOD will evaluate its
own operations X X
16. The company’s
programme/policies for
the education of new
directors X X
(continued)
reporting
governance
Corporate
Table AI.
25
26
10,1
JFRA
Table AI.
2009) (2008) (2007) (2006) (2005) (2002) (2007) (2008) (2008) (2008)
Category 3 items: external auditing and non-audit services

1. Auditor X X X
2. Audit and professional
fees X
3. Information on
non-audit services
provided by an audit
firm and/or group
undertakings (fees for
non-audit services) X X X
4. Major findings of
external audit
investigations are
disclosed X
5. Policy on relationships
with external auditors is
spelt out X X
6. Notes on appointments
of independent
professional advisor(s)
and service of company
secretary are disclosed X
Category 4 items: transparency disclosures
1. The company’s
accounting policy X X X X
(continued)

2009) (2008) (2007) (2006) (2005) (2002) (2007) (2008) (2008) (2008)
2. List international
accounting standards
applied or not applied/
local accounting
standard X X X X
3. Consolidated financial
statements X X X
4. Stock price information X X X
5. Chairman’s statement X X X
6. Managing director’s
review X X X
7. Internal control function
of internal audit X X X X X
8. Risk management X X X
9. Corporate governance
statement and
awareness X X X X X
10. Publication of annual
corporate governance
report X X
11. Summary of reports
issued by significant
analysts, investment
banks and rating
agencies X X X
(continued)
reporting
governance
Corporate
Table AI.
27
28
10,1
JFRA
Table AI.
2009) (2008) (2007) (2006) (2005) (2002) (2007) (2008) (2008) (2008)
12. Where the company is

listed on other markets,
disclosure of the results
and financial situation
based on the application
of rules prevailing in
such markets X X
13. Disclosure of matters
related to AGM;
information regarding
agenda; information
concerning wording of
proposed resolutions X X X X X
14. Disclosure of reports
concerning corporate
social responsibility
(business ethics code,
environmental policy
and other public
political commitments) X X
15. Disclosure of penalties
and sanctions against or
by the company X X X X
The initial index checked against annual

reports
The initial index potential items Modification: keep,
Appendix 2
(preliminary index A) Score delete or add The final index (B) Source of the item Item classification
Category 1 items: ownership structure and investor relations/rights

1. Interests (no. of shares) held by 0 Deleted Prior studies Value-adding
directors
in share capital
2. List of and number (percentage) 0 Deleted Prior studies Value-adding
of shares
held by major shareholders
3. Describe the company approval 0.01 Deleted UAE code Mandatory
of rules
governing directors’ transactions
in securities
4. Mention/details of articles of 1 Kept 1. Mention/details of articles of association Prior studies Value-adding
association (Articles of Incorporation)
(Articles of Incorporation)
5. Related party transactions 0.96 Kept 2. Related party transactions UAE code Mandatory
6. Treasury stock held by the 0.14 Kept 3. Treasury stock held by the company UAE code Mandatory
company
7. Description of share classes 0.95 Kept 4. Description of share classes Prior studies Value-adding
8. Notice of change in substantial 0.15 Kept 5. Notice of change in substantial holdings Prior studies Value-adding
holdings
9. Dividends 0.68 Kept and 6. Proposed dividends Prior studies Value-adding
modified
10. Information about share voting 0.01 Deleted Prior studies Value-adding
and voting agreements
0.58 Added 7. Convertible securities/bonds/ Exists in the Value-adding
stock dividends – options/bonus shares/ annual reports
dilutive instruments
0.55 Added 8. Notice/mention of (change in) subsidiaries Exists in the Value-adding
annual reports
0.97 Added 9. Basic EPS Exists in the Value-adding
annual reports
0.42 Added 10. Diluted EPS Exists in the Value-adding
annual reports
0.52 Added 11. Mention of “policies governing related parties Exists in the Value-adding
transactions”/pricing policies and terms annual reports
of these transaction approved by management
(continued)
reporting
governance
reporting index
Corporate
The processes of
Table AII.
29
crafting the governance

30
10,1
JFRA
Table AII.
reports
Category 2 items: board and management structure/processes

1. Board members 0.97 Kept 1. Board members UAE code Mandatory
2. Board structure 0.25 Kept 2. Board structure UAE code Mandatory
3. Information on BOD 0.01 Deleted UAE code Mandatory
(independent – non-executives)
qualifications and experience
4. Term in office 0.05 Kept 3. Term in the office UAE code Mandatory
5. Change in BOD – selection, de- 0.38 Kept 4. Change in BOD – selection, de-selection Prior studies Value-adding
selection and re-election and re-election procedures of BOD members
procedures of BOD members
6. Explicit description of conditions 0.00 Deleted UAE code Mandatory
determining the independence
and being non-executive of
directors
7. Public disclosure of offices held 0.00 Deleted UAE code Mandatory
by any independent director in
other companies
8. Details of director remuneration 0.85 Kept 5. Details of director remuneration UAE code Mandatory
9. State the no. of the Board of 0.02 Deleted UAE code Mandatory
Directors’ meetings held during
the year
10. State the directors’ attendance in 0.00 Deleted UAE code Mandatory
person at the meetings of the
BODs
11. Describe the functions and 0.22 Kept 6. Describe the functions and competencies of UAE code Mandatory
competencies of the BODs and the BOD and delegated management
delegated management
12. List of board committees – audit, 0.32 Kept 7. List of board committees – audit, remuneration, UAE code Mandatory
remuneration, remuneration, risk remuneration, risk management and governance
management and governance committees
committee
13. Explicit description of relations 0.00 Deleted UAE code Mandatory
between directors and other
individuals (relative or non-
relative) that cause a conflict of
interest
14. Mention the separation of 0.01 Deleted UAE code Mandatory
chairman and CEO
(continued)

reports
15. Description of how the BOD will 0.42 Kept 8. Description of how the BOD will evaluate Prior studies Value-adding
evaluate its own operations its own operations
16. The company’s programme/ 0.21 Kept 9. The company’s programme/policies Prior studies Value-adding
policies for the education of new for the education of new directors
directors
0.35 Added 10. How BOD remuneration is calculated/ Exists in the Value-adding
Article 118 of the 1984 Act annual reports
Category 3 items: external auditing and non-audit services
1. Auditor 0.98 Kept 1. Auditor name UAE code Mandatory
2. Audit and professional fees 0.46 Kept 2. Audit and professional fees UAE code Mandatory
3. Information on non-audit services 0.00 Deleted UAE code Mandatory
provided by an audit firm and/or
group undertakings (fees for
non-audit services)
4. Major findings of external audit 0.98 Kept 3. Major findings of external audit investigations Prior studies Value-adding
investigations are disclosed
are disclosed
5. Policy on relationships with 0.64 Kept and modified 4. Just spelt out the eligibility for reappointment Prior studies Value-adding
external auditors for the next year
is spelt out
6. Notes on appointments of 0.00 Deleted Prior studies Value-adding
independent
professional advisor(s) and
service of
company secretary are disclosed
Category 4 items: transparency disclosures
1. The company’s accounting policy 1 Kept 1. The company’s accounting policy Prior studies Value-adding
2. List international accounting 0.97 Kept and modified 2. List international accounting standards applied Prior studies Value-adding
standards applied or not applied; local accounting standards;
or not applied/local accounting regulation of Central Bank – 1984 Act; Shari’a Law
standard
3. Consolidated financial statements 0.61 Kept 3. Consolidated financial statements Prior studies Value-adding
4. Stock price information 0.07 Kept 4. Stock price information Prior studies Value-adding
5. Chairman’s statement 0.58 Kept and modified 5. Chairman’s/BOD statement Prior studies Value-adding
6. Managing director’s review 0.13 Kept and modified 6. Managing director’s review. operating & Prior studies Value-adding
financial review/Shari’a Supervisory Board
(continued)
reporting
governance
Corporate
Table AII.
31
32
10,1
JFRA
Table AII.
reports
7. Internal control function of 0.32 Kept 7. Internal control function of internal audit Prior studies Value-adding
internal audit
8. Risk management 0.97 Kept and modified 8. Disclosure of financial risks and risk management Prior studies Value-adding
9. Corporate governance statement 0.39 Kept 9. Corporate governance statement and awareness Prior studies Value-adding
and awareness
10. Publication of annual corporate 0.01 Deleted UAE code Mandatory
governance report
11. Summary of reports issued by 0.14 Kept 10. Summary of reports issued by significant UAE code Mandatory
significant analysts, analysts, investment banks and rating agencies
investment banks and rating
agencies
12. Where the company is listed on 0.09 Kept 11. Where the company is listed on other markets, Prior studies Value-adding
other markets, disclosure of the application of rules prevailing
disclosure of results and financial in such markets
situation based
on the application of rules
prevailing in such markets
13. Disclosure of matters related to 0.71 Kept 12. Disclosure of matters related to the AGM; UAE code Mandatory
the AGM; information information regarding the agenda; information
regarding the agenda; concerning the wording of proposed resolutions
information concerning the
wording of proposed resolutions
14. Disclosure of reports concerning 0.68 Kept 13. Statement concerning corporate social responsibility Prior studies Value-adding
corporate social (environmental policy and other public
responsibility (business ethics political commitments)
code, environmental policy
and other public political
commitments)
15. Disclosure of penalties and 0.10 Kept and 14. Disclosure of penalties and sanctions against UAE code Mandatory
sanctions against modified or by the company/legal claims or litigations
or by the company
0.92 Added 15. Employees’ leave and indemnity/benefits Exists in the Value-adding
annual reports
0.84 Added 16. Capital management Exists in the Value-adding
annual reports
0.11 Added 17. Regulatory framework management Exists in the Value-adding
annual reports
Total of 47 items Total of 42 items
Appendix 3
Index modified in accordance

with the UAE governance code Index after checked against annual reports
Value-adding Value-adding
Previous Existing in Previous Existing in
Categories and items Mandatory studies annual reports Total Mandatory studies annual reports Total
Ownership structure and investors’ rights 3 7 NA 10 2 4 5 11

Board and management structure and processes 13 3 NA 16 6 3 1 10
External auditing and audit service 3 3 NA 6 2 2 0 4
Transparency disclosures 4 11 NA 15 3 11 3 17
Total 23 24 NA 47 13 20 9 42
reporting
governance
Corporate
33
The modification
of the governance
reporting index
Table AIII.
This article has been cited by:
1. Walaa Wahid ElKelish, Mostafa Kamal Hassan. 2015. Corporate governance disclosure and share price
accuracy. Journal of Applied Accounting Research 16:2, 265-286. [Abstract] [Full Text] [PDF]
2. Mostafa Kamal Hassan, Sawsan Saadi Halbouni. 2013. Corporate governance, economic turbulence and
financial performance of UAE listed firms. Studies in Economics and Finance 30:2, 118-138. [Abstract]
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A disclosure index to measure the extent of corporate governance reporting by UAE

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of governance, makes corporate governance reporting in that emerging market an

2. Corporate governance reporting

governance reporting index, this ethos should be acknowledged in it. Corporate

3. Crafting the corporate governance disclosure index

(1) rights of shareholders and ownership structure;

The final corporate governance reporting index, comprising 42 items, consists of

3.3 Stage three: item weightings

3 if it is recommended by prior studies (value-adding items recommended by prior

Category code Category label Total maximum score

TG1-24 Ownership structure and investors’ rights 24 Table I.

to UAE corporations. Third, it highlights the importance of the underlying objectives

The study relies on the ES&CMA industry classification as an objective criterion to

4.2 Descriptive analysis

TG1-24 TG2-17 TG3-8 TG4-42 T. score

Industry (n ¼ 24) Banking (n ¼ 20) Insurance (n ¼ 26) Service (n ¼ 25)

TG1-24 11 24 15.79 7 23 16.95 8 21 14.15 6 21 16.08

4.3 Variations between sectors

Sum of squares df Mean square F Sig.

TG1-24 Between groups 97.088 3 32.363 2.737 0.048

Service 2.410 * 0.887 0.039 0.09 4.73

recommended by prior studies. To recall, Appendix 1 draws a comparison between the

5. Conclusion, limitations and future research

research subjectivity by, as Al-Razeen and Karbhari (2004) suggest, reviewing

governance”, Journal of Accounting and Economics, Vol. 31, pp. 237-333.

Auditing and Taxation, Vol. 10, pp. 139-56.

3 of 1990, concerning commercial corporations operating in the UAE.

About the author

To purchase reprints of this article please e-mail: reprints@emeraldinsight.com

The UAE Aksu Collett Hussainey

Category 1 items: ownership structure and investor relations/rights

Sources of the corporate

index’s potential items

Category 2 items: board and management structure/processes

The UAE Aksu Collett Hussainey

10. State the directors’

Category 3 items: external auditing and non-audit services

The UAE Aksu Collett Hussainey

12. Where the company is

The initial index checked against annual

Category 1 items: ownership structure and investor relations/rights

crafting the governance

Category 2 items: board and management structure/processes

The initial index checked against annual

Index modified in accordance

Ownership structure and investors’ rights 3 7 NA 10 2 4 5 11

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