The effect of board-related reforms on investors' Confidence

We survey Australian institutional and individual investors regarding how board-related reforms in the Australian Stock Exchange Corporate Governance Council 2003 recommendations and changes to the Corporations Act 2001 in 2004 affect their confidence as investors. The overall results are consistent with suggestions that individual and institutional investors differ in their corporate governance preferences and expectations. The results reveal that, for both individual and institutional investors, the average investor's confidence is improved by increased independence of the board and its committees, increased disclosures of corporate governance information, and CEO and CFO responsibility for the integrity of financial statements. The effect is strongest for individual investors, who also expect greater time commitments by non-executive directors. Institutional investors appear to have more concern for directors' competence or networking.