Internet disclosure and corporate performance: A case study of the international shipping industry

Dissemination of information via corporate websites is considered to be desirable, because it constitutes a way round modes of market failure, such as asymmetric information in capital markets and agency problems. This paper explores the relationship between internet disclosure, profitability and financial structure in the shipping sector. Its value added lies in treating the disclosure–profitability relationship as a two-way relationship: while previous research concentrates on profitability as the main driver for greater internet disclosure, we argue that the higher the degree of internet disclosure of financial information, the more likely it is that the firm will experience enhanced profitability. Studying the websites of 171 international listed shipping corporations in 2010 we construct a disclosure index to measure the quantity of disseminated information for each firm in the sample and we explore the cross sectional determinants of disclosure performance. Measuring corporate performance with profitability, we develop a simultaneous equation model and our GMM results produce evidence of a statistically significant positive relationship between the extent of internet disclosure and corporate performance. Our finding largely explains why shipping firms are keen on making more and more financial information available via the web and has significant policy implications for executives, as it suggests that greater internet disclosure is not a mere effect of sound financial performance, but also, and perhaps more importantly, a requirement for it.

► We explore the relationship between internet disclosure, profitability and financial structure in the shipping sector.
► The added value lies mostly in treating the disclosure–profitability relationship as a bidirectional, causal one.
► We studied the websites of 171 international listed shipping corporations in 2010.
► We measured the quantity of disseminated information with a disclosure index.
► In a GMM setup, we discover a positive relationship between the extent of internet disclosure and corporate performance.