Governance structures, voluntary disclosures and public accountability: The case of UK higher education institutions

Introduction

Globally, the past decades have witnessed rapid changes and/or reforms in the higher education (HE) sector (Bennett, 2002; Taylor, 2013a, b). In particular, increasing student numbers, declining central government funding, tightening regulation, expanding academic curricula and non-academic activities, more discerning and demanding multiple stakeholders, increasing national and international competition, creeping “managerialism” of academic work/output, un-relenting “commoditisation” of the academic service and increasing “corporatisation” of higher education institutions (HEIs), amongst others, have been widely acknowledged (Shattock, 1998, 1999; Dearlove, 2002; Toma, 2007; Kim, 2008; Trakman, 2008; Parker, 2011; Middlehurst, 2013; Parry, 2013; Rowlands, 2013; Taylor, 2013a, b). Equally noticeable is that these public sector and HEI reforms have brought to the fore issues of financial management through internal governance, public accountability and transparency and performance within HEIs worldwide (Coy et al., 1994, 1997; Jones et al., 2001; Oxholm, 2005; Hordern, 2013), and concurrently concerns about the financialisation of HEIs (Nagy and Robb, 2008; Parker, 2013). Observably, the UK has been at the forefront of such internal governance reforms (Robins, 1963; Jarratt, 1985; Nolan, 1995/1996; Dearing, 1997; Lambert, 2003; Browne, 2010). However, drastic cuts in the further and HE budget of about 29 per cent in 2010 by the UK Central Government following the 2007/2008 global banking crisis and the subsequent implementation of the recommendations of the Browne’s (2010) report on HE funding and student finance has further heightened the importance of financial management, governance, and accountability within UK HEIs (Hordern, 2013; Middlehurst, 2013; Rowlands, 2013; Taylor, 2013a, b), thereby offering an interesting and natural setting to examine these aspects. The key aims of this paper, therefore, are to: investigate the public accountability and transparency of UK HEIs by focussing on the extent of voluntary disclosures in their annual reports[1]; and examine whether internal governance structures influence the level of disclosures by such institutions in the face of recent HEI reforms, especially those that have been akin to the introduction of “market” or “quasi-market” conditions.

Theoretically, we suggest that HEIs and their managers and governing board members may commit to a greater extent of voluntary disclosure for a number of reasons. First, the public accountability perspective suggests that managers are inherently trustworthy with greater commitment towards public accountability and transparency, and thus are more likely to engage in voluntary disclosure (Donaldson and Davis, 1991, 1994; Coy et al., 2011). Second, according to legitimacy theory-based predictions (Ashforth and Gibbs, 1990; Suchman, 1995), increased voluntary disclosure can be a strategic means by which HEIs can demonstrate congruence of their goals and norms with those of the larger society (Reverte, 2009; Chen and Roberts, 2010), with positive consequences for institutional reputation, image and public goodwill. Third, stakeholder theory predicts that increased levels of voluntary disclosure conveys commitments to greater accountability and transparency (Gordon et al., 2002; Nelson et al., 2003; Coy and Dixon, 2004), which may be an important way of winning the support of powerful stakeholders, such as students, parents, funding bodies, research councils, government, employers and employees (Freeman and Reed, 1983; Freeman, 1984; Donaldson and Preston, 1995; Michelon and Parbonetti, 2012), whose contributions are critical to the long-term viability of HEIs. Fourth, resource dependence theory predicts that increased voluntary disclosure (Coy et al., 1991; Cutt et al., 1993; Vidovich and Currie, 2011) can help in granting HEIs access to important resources, such as donations, funds, reduced political costs through enhanced institutional image and reputation (Pfeffer and Salancik, 1978; Branco and Rodrigues, 2006; Chen and Roberts, 2010). In sum, whilst public accountability and legitimacy theories primarily conceptualise the broader “social” duties and responsibilities of public sector HEIs and how voluntary disclosures seek to reflect such duties and responsibilities, resource dependence and stakeholder perspectives tend to be more directly concerned with the instrumental benefits (e.g. student income, research funding, donations and corporate support) that may be derived from providing voluntary disclosures. Theoretically, we contend that the recent pressures and reforms highlighted by some of the previously mentioned studies seem to offer support for the increasing relevance of the last two theoretical strands in explaining the extent of voluntary disclosures in the HEI sector. In light of the potential multiplicity of rationales underlying the use of voluntary disclosures, we contend, therefore, that the ability of any single theoretical framework to explain the numerous motivations for engaging in voluntary disclosures will be limited, and hence, arguably justifying the use of a multi-theoretical framework.

The extant literature has explored governance, accountability and transparency issues within UK HEIs (Gray and Haslam, 1990; Banks et al., 1997; Coy and Pratt, 1998; Sizer and Howells, 2000; Jones et al., 2001; Parry, 2013; Taylor, 2013a, b). However, we argue there are a number of research gaps. First, existing studies are mainly normative in nature – usually offering critical reflections on the extensive HE policy reforms and changes, but often with limited empirical/anecdotal insights (Shattock, 1998, 1999, 2002, 2004; Bennett, 2002; Dearlove, 2002; Knight, 2002; Salter and Tapper, 2002; Oxholm, 2005; Toma, 2007; Kim, 2008; Trakman, 2008; Melville-Ross, 2010; Hordern, 2013). Whilst such critical reflections are generally helpful in understanding governance and accountability reforms in the HE sector, their insights are impaired by an inability to offer large-scale empirical insights on the direct impact of such reforms on HEIs to governments, policy makers and regulatory authorities. Second, and although there are a limited number of empirical studies on HEI voluntary disclosure (Coy et al., 1991, 1994, 1997; Dixon et al., 1991; Cutt et al., 1993; Banks et al., 1997; Coy and Pratt, 1998; Gordon et al., 2002; Committee of University of Chairmen (CUC) 2000/2006, 2001; Kezar, 2006; Maingot and Zeghal, 2008), there has been scant attention to the UK, and other studies have either been largely descriptive/qualitative in orientation with limited theoretical insights or have focussed primarily on investigating how general institutional-level characteristics, such as size and turnover affect the level of voluntary disclosure (Gray and Haslam, 1990; Coy et al., 2011; Maingot and Zeghal, 2008). In addition, and despite the increasing evidence that organisational disclosure decisions, including voluntary ones are largely driven by top management teams (Eng and Mak, 2003; Collett and Hrasky, 2005; Barako et al., 2006a, b; Beekes and Brown, 2006), studies examining how an HEI’s internal governance mechanisms may influence its disclosure are rare (Gordon et al., 2002). Arguably, this impairs the current understanding of why and how internal governance structures might enhance or limit voluntary disclosures, particularly in the UK context, where there has been significant efforts to “modernise” governance structures and standards in HEIs on the basis of private-sector models (Schofield, 2009; Parker, 2011).

Hence, the current study seeks to address the above gaps, as well as make a number of new contributions to the existing HEI governance and accounting literature. First, and using a modified version of Coy and Dixon’s (2004) public accountability index (PAI) we contribute to the literature by providing contemporary evidence on the level of voluntary disclosure by UK HEIs. This extends the findings of prior studies that provide descriptive accounts of the level of disclosure HEIs, particularly in the case of the UK (Gray and Haslam, 1990; Banks et al., 1997). To the best of our knowledge, it also appears that the PAI has never been applied within the UK HEI context and this study will thus provide a relatively robust benchmark to compare with future studies relying on this index or findings from other countries. Second, we contribute to the literature by examining the extent to which a HEI’s internal governance structure may influence its voluntary disclosure in an HE setting characterised by corporate governance developments, recent funding constraints and student access reforms. Arguably, this provides an important extension of, and improvement in, previous studies (Banks et al., 1997; Nelson et al., 2003; Maingot and Zeghal, 2008) that have only explored how HEI-specific features, such as turnover and size, affect disclosure. The leadership and oversight roles of governing boards in the UK has been under scrutiny for some time, initially in relation to selected institutional failures, but more recently in view of competitive, accountability and strategic challenges faced by HEIs, and the question remains as to whether governing boards can contribute effectively towards addressing such challenges (Dearing, 1997; Shattock, 2002, 2004; Oxholm, 2005; Browne, 2010; Middlehurst, 2004, 2013; Havergal, 2015a).

Relatedly, governance arrangements in HEIs are traditionally seen to be a “shared” one, usually involving close interactions among three main bodies, namely the governing council (the board), the senate (the academic arm), and the senior executive management team (primarily the vice-chancellor (VC) and his/her team) (Shattock, 1998, 1999; Bennett, 2002; Dearlove, 2002; Toma, 2007). However, this governance model has been observed to under threat in the UK and elsewhere (Parker, 2011; Taylor, 2013a). Based on the empirical results, our contention is that the impact of internal governance structures on voluntary disclosure may be enhanced when these governance structures are interacted rather than being on their own. Thus, our third distinctive contribution to the literature lies in providing evidence supporting the moderating effect of internal governance mechanisms, and by extension the “shared” governance model on voluntary disclosure.

The remainder of the paper is structured as follows. The next section discusses governance structures and reforms that have been pursued within the UK HE sector. The following sections present a multi-theoretical framework underpinning the study of voluntary disclosures, discuss the governance and voluntary disclosure literature, outline the research design and present the empirical analyses, with the concluding remarks containing a summary and a discussion of the policy implications and wider considerations for the HEI sector.

Governance structures and funding reforms within the UK HEI context

It has been widely acknowledged that the UK has been at the forefront of HE sector policy reforms with particular focus on promoting sound financial management via good internal governance arrangements, greater public accountability and transparency and stronger performance (Jones et al., 2001; Oxholm, 2005; Toma, 2007; Vidovich and Currie, 2011; Parker, 2012; Rowlands, 2013). In fact, there is a track record of extensive and sustained HE reforms in the UK, often engendered by new public management (NPM) discourses and/or central government funding cuts (Robins, 1963; Jarratt, 1985; Educational Reform Act (ERA), 1988; Further and Higher Education Act (FHEA), 1992; Nolan, 1995/1996; Dearing, 1997; Teaching and Higher Education Act, 1998; Lambert, 2003; Higher Education Act, 2004; Browne, 2010). However, until the 1900s, HEIs in the UK, especially universities had been considered autonomous liberal institutions whose primary aim had been the production and transmission of knowledge for “its own sake” (Shattock, 1998, 1999; Middlehurst, 2004). Central to this liberal or traditional view is that unbridled university autonomy and academic freedom were fundamental to their capacity to produce, preserve and transmit knowledge and values on which civilised societies depended (Bennett, 2002; Shattock, 2002, 2004; Middlehurst, 2004, 2013). Thus, academic (“professorial”) opinion was “supreme” with UK HEIs being in the main able to successfully resist external economic, political and social pressures of the time (Dearlove, 2002; Knight, 2002; Kim, 2008; Trakman, 2008). Consequently, HEIs internal governance arrangements were structured to ensure that the traditional view thrived. Specifically, HEIs were set up by royal charters with collegial or faculty governance structures (Trakman, 2008), in which academic authority was “supreme”, with senior academics taking strategic and operational decisions, as well as assuming leadership and management positions, including chairing every major committee (Sizer and Howells, 2000; Middlehurst, 2004). Whilst in theory, a two-tier governance structure, consisting of the senate formed entirely by academics, including the incumbent VC with academic powers, and the governing council (court in Scotland), which included lay or independent governors (IGOV) with broad policy and administrative powers (Shattock, 2002, 2004), in practice, the council was largely a titular body whose function had been reduced effectively to that of an approval body (Dearlove, 2002; Knight, 2002; Middlehurst, 2013; Parry, 2013). In effect, UK HEIs, especially universities were self-governing institutions, often espousing “academic democracy[2]” through collegial and senior faculty “shared” governance model with limited external regulation and less demand for public accountability and transparency (Taylor, 2013a).

The liberal concept of UK HEI governance went unchallenged until 1919 when the University Grants Committee was established by the government with the power of determining and granting university status with direct administrative and financial oversight over HEIs through its research council (which later became funding councils) (Bennett, 2002; Dearlove, 2002; Knight, 2002). However, tighter direct external control and state regulation did not start until the publication of the influential Robins’ (1963) report on HE (Middlehurst, 2004; Shattock, 2002, 2004; Kim, 2008). The Robins report recommended substantial expansion of the HE sector by upgrading a large number of former technical institutes, further educational colleges and vocational institutions into tertiary institutions or HEIs, with its suggestions arguably forming the main backbone for the development of the university sector till present (Bennett, 2002; Dearlove, 2002; Knight, 2002; Salter and Tapper, 2002; Middlehurst, 2013)[3]. In effect, the Robins report promoted a neo-liberal view of higher education as an alternative to the then dominant liberal ideology. Specifically, neo-liberalism emphasised learning for instrumental and vocational purposes in contrast to the liberal view that focussed mainly on the intrinsic value of learning (Sizer and Howells, 2000; Bennett, 2002; Middlehurst, 2004, 2013). Thus, the Robins report viewed education as an economic resource that needed to be exploited to support economic development. As such, it required a new kind of HEIs – polytechnics/colleges, which can provide vocational, professional and industrially relevant HE programmes, that were distinct from the academically oriented courses offered by their liberal counterparts (Bennett, 2002; Dearlove, 2002; Knight, 2002; Salter and Tapper, 2002; Shattock, 2002, 2004; Kim, 2008; Trakman, 2008; Middlehurst, 2004, 2013).

However, whilst the Robins report had introduced economic instrumentalism and mass education into the UK HE sector, the polytechnics/colleges unlike their liberal university counterparts were still under the control of local councils. Therefore, their development was often impeded due to persistent bureaucratic and local political interference in their governance and administrative structures (Dearlove, 2002). As a result, a new HE report, the Jarratt Report, which focussed mainly on improving efficiency in universities, was published in 1985. Its recommendations were wide ranging, but the central thrust was that universities should be incorporated and run as normal profit-making business or commercial enterprises (Knight, 2002; Salter and Tapper, 2002; Middlehurst, 2004, 2013)[4]. With specific reference to internal governance arrangements, the Jarratt report argued that the traditional two-tier governance structure of the liberal universities with excessive academic authority tended to be slow and bureaucratic in decision making, inhibited innovation and enterprise and thus, was inefficient. The Jarratt report, therefore, suggested that “new” or “modern” universities should be formed as public “corporations” with a business-like looking unitary or one-tier governing board, consisting of a majority of “independent/co-opted” or “lay” members (non-academics or outsiders)[5], who are severally and jointly responsible and accountable for the governance of their institutions (Sizer and Howells, 2000; Knight, 2002; Salter and Tapper, 2002; Hordern, 2013; Parry, 2013). Of particular interest, the Jarratt report recommended that the governing board membership should not be less than 12, but not more than 25, including the VC, whose position and authority was elevated to that of a chief executive officer (CEO). Similarly, it suggested further that a majority of the independent members should have industrial or commercial experience with the work of the governing board supported by corporate-like looking sub-committees, such as audit, nomination and remuneration committees. In effect, the Jarratt report sought to weaken the influence of academics in university governance, whilst strengthening that of lay members, especially those with experience of running successful commercial enterprises.

The recommendations of the Jarratt report, especially regarding incorporation and governance was passed into law in the form of the influential ERA (1988). The ERA (1988), therefore, effectively freed the polytechnics from local authority control by transferring their ownership from local educational authorities to HE corporations. The members of the higher educational authorities constituted the board of governors, leading to a two-tier HEI system: polytechnics (“corporations”) and universities (“royal charters”) with differing governance arrangements. The ERA also created separate funding arrangements, with the polytechnics and colleges funded by the Polytechnics and Colleges Funding Council (PCFC) and the universities funded by the Universities Funding Council (CFC). The two-tier HE sector was further abolished by the FHEA (1992) primarily by: merging the PCFC and CFC to form a single funding council for all HEIs, namely the Higher Education Funding Council in England (HEFCE) with its respective Northern Irish (DENI), Scottish (SHEFC) and Welsh (HEFCW) counterparts; and granting the polytechnics and some colleges a full “university status”.

Although and arguably, these reforms had helped in making HEIs more responsive to the country’s economic needs by improving access, quality and efficiency (Bennett, 2002), it had equally led to rapid increases in the number of students in UK HEIs. For example, the number of 18-year-olds entering HEIs increased sharply from about 8 per cent in the 1960s to about 43 per cent in the 2000s, which is a bit close to the UK’s Government target of achieving 50 per cent participation rate (Dearlove, 2002; Kim, 2008). However, mass HE is expensive and hence, funding costs equally increased rapidly. For example, the proportion of public funding relative to total university income increased rapidly from about 33 per cent in the 1930s to over 90 per cent in the 1970s (Dearlove, 2002, p. 259; Kim, 2008), although it reduced back to about 60 per cent in the 2000s (Shattock, 2013). Thus, expanding access to HE with increasing public funding has often stretched the UK government public budgets, especially in periods of economic difficulty. Consequently, achieving value-for-money through financial management and good governance in HEIs has been a high priority of almost every UK government with a number of reports being commissioned in the 1990s/2000s that have been aimed at reforming HE governance and funding. These reports include the Nolan’s (1995/1996) report, Dearing’s (1997) report, Lambert’s (2003) report and Browne’s (2010) report.

Briefly, whilst the first Nolan report in 1995 (“committee on standards in public life”) generally highlighted seven main principles (selfless, integrity, objectivity, accountability, honesty, openness and leadership) that should guide the conduct of public officers, including those governing HEIs, the second Nolan report in 1996 focussed specifically on governance structures in the “new” (“post-1992”) and “old” (“pre-1992”) universities, with its recommendations generally supporting the separate governance arrangements between the pre- and post-1992 universities (Dearlove, 2002). Similarly, the Dearing’s (1997) report (“national committee of inquiry into HE”) focussed on reforming governance and funding in the HE sector. With respect to governance, and unlike the 1996 Nolan’s report, Dearing was more critical. In particular, it argued that the size of the governing boards of the pre-1992 universities, of about 34 on average, were too large and thus, recommended that it should be reduced to 25 to be in line with those of the post-1992 universities (Dearlove, 2002; Shattock, 2004). In addition, it proposed a code of governance for HEIs (although it did not formally include it in its final recommendations), which was heavily influenced by the recommendations that were contained in the Cadbury’s (1992) report (Dearlove, 2002; Shattock, 2004, 2013). With respect to funding, the Dearing report recommended a fundamental change in tuition fees from being funded only by free government grants to a mixed system of government grants and student fees, supported by low-interest government loans. This effectively ended the free HE system in the UK, and thereby leading to dramatic declines in public funding of about 37 per cent per student (Kim, 2008; Trakman, 2008).

Meanwhile the Committee of University Chairs (CUC), under the threat of government action, following a series of instances of poor governance in a number of post-1992 HEIs, issued its first voluntary code (“guide”) of governance for HEIs in 1995 with subsequent revisions in 1998, 2000, 2004 and 2009 (Shattock, 2004, 2013). Although the code was mainly targeted at the post-1992 universities, the CUC encouraged the pre-1992 universities to also follow the code, particularly with respect to the size of their governing boards. These developments also led to the publication of the Lambert (2003) review, which focussed primarily on examining business-university collaborations, but its remit also included governance. Unlike the Dearing’s (1997) report, the Lambert’s (2003) report formally included a code of governance for all HEIs to follow with financial penalties for non-compliance, including the pre-1992 universities. The CUC incorporated Lambert’s report recommendations into its current (2009) “guide for members of higher education governing bodies in the UK,[6]” thus, effectively bringing the internal governance structures of the pre-1992 universities in line with those of the post-1992s. Furthermore, and following the 2007/2008 banking crisis that led to drastic cuts in the UK Government budgets, the Browne report, which focussed on reforming HE funding, including student finance was published in 2010 (Melville-Ross, 2010; Taylor, 2013b). The Browne’s report main recommendation has been the introduction of full-tuition fees with a maximum cap of £9,000 and removal of controls/caps in terms of the number of students that UK HEIs can admit. It has also reformed the system of funding and loan repayment by replacing the funding council (HEFCE) with a new student loan company. In effect, the Browne’s report has introduced a “market” or “quasi-market (i.e. government still provides funds/loans to students via the student loan company, but students have the freedom to choose any university of their choice)” economy in the HE sector with the aim of improving quality, but reducing costs by increasing direct competition among UK HEIs. In parallel, funding councils (such as the HEFCE) and other HE umbrella bodies have been highlighting the risks to financial sustainability (Financial Strategy Sustainability Group (FSSG), 2011), the need to improve efficiency, effectiveness and value-for-money (Universities UK (UUK), 2011) and to develop/monitor/report organisational key performance indicators (Committee of University of Chairmen/Chairs (CUC), 2006). In each case, governing boards are expected to pay greater attention to the assessment of these elements and to their reporting and communication to stakeholders. Relatedly, concerns about the wider accountability of the governing bodies were expressed in a review of Scottish HEI governance (Von Prondzynski, 2012; Havergal, 2015a, b) leading to a recommendation, amongst others, of including a key governing board objective aimed at “ensuring stakeholder participation and accounting to the wider society for institutional performance” (Von Prondzynski, 2012, p. 8).

These governance and funding reforms have gradually led to greater demand for public accountability, transparency and performance, mainly through increased external regulatory scrutiny and funding conditions, such as teaching quality inspections by the Quality Assurance Agency for Higher Education (QAA), the research assessment exercises (e.g. the 2014 research excellence framework), and a range of performance/access data via the Higher Education Statistics Agency (HESA). Furthermore, the annual accountability return (which does include financial statements, risk management, sustainability, audit committee and governance reports) is an extensive reporting exercise aimed at satisfying the contractual conditions set between the relevant UK HE funding body (England, Scotland, Wales and Northern Ireland) and each HEI, but the reporting exercise is effectively a private communication between the parties. Finally, results from the National Student Survey (NSS), the Postgraduate Taught Experience Survey and the Postgraduate Research Experience Survey have been in operation since 2005, and 2009, respectively, and some of the data have been summarised in a key information set that is specifically aimed at helping students compare and contrast data and information on universities and their programmes. The results of these research and teaching assessments, and student surveys feed directly into national and international rankings of HEIs with serious implications for national and international institutional quality, reputation and competitiveness. It is in this rather competitive, complex and changing environment that we seek to study the extent to which HEIs’ annual reports provide information on its activities relating to teaching, research, administration, governance and relationships with its other stakeholders. The multiplicity of the audiences and their underlying rationales for relying on such disclosures leads us to consider the study from a multi-theoretical perspective.

A multi-theoretical framework for voluntary disclosures in HEIs

First, it has to be acknowledged that the study of voluntary disclosure is an extensive area of the corporate accounting literature (e.g. Healy and Palepu, 2001; Samaha et al., 2015) and typically, voluntary disclosure refers to information “released to the outside, deriving from the management’s insider knowledge of the company, which are not required to be published in regulated reports” (Allegrini and Greco, 2013, p. 187) and is as such a reporting initiative taken by management, whether at the executive or board level. An extensive part of this literature is concerned about the overall level of disclosure and the reasons underlying the differences in disclosure across firms and countries, and whilst some firm level factors (e.g. company size) are consistently found to be associated to disclosure, the results are more mixed when it comes to corporate governance factors (e.g. Samaha et al., 2015)[7] leading to unclear implications and policies for firms and countries engaged in corporate governance reforms. Second and from a theoretical angle, the agency perspective is frequently put forward to explain why managers in a corporate for-profit context may be inclined to engage in a discretionary behaviour of disclosure (e.g. Eng and Mak, 2003; Barako et al., 2006a, b; Trabelsi et al., 2008; Elsayed and Hoque, 2010; Broberg et al., 2010). Such approaches are consistent with a functional-led view of voluntary disclosures (whether social or financial in nature), whereby the information is conveyed primarily to assist users in making specific assessments and decisions (e.g. investing or divesting, monitoring managerial performance and actions, ensuring contractual commitment are met and in assessing risk). In particular, agency theory posits that voluntary disclosures are a means to reduce information asymmetry between contractually related partners. Relatedly, the influence and interaction of corporate governance (internal and/or external mechanisms) have also been considered in terms of whether they promote or impede the extent of voluntary disclosures (e.g. Lim et al., 2007; Rogers and Van Buskirk, 2009; Chau and Gray, 2010; Samaha et al., 2012, 2015), with mixed results and often inconsistent implications for any single main theoretical perspective, such as the dominant agency theory. Therefore, there has been a recent and gradual incorporation of a wider set of social-, political- and institutional-led motivations in the voluntary disclosure literature, which have either sought to complement or supersede the mainstream perspectives (Gray et al., 1995; Branco and Rodrigues, 2008; Chen and Roberts, 2010; Stubbs and Higgins, 2014). In particular, public accountability, legitimacy, resource dependence and stakeholder theories have emerged (e.g. Coy et al., 1997, 2011; Nelson et al., 2003; Mahadeo et al., 2011; Chen and Roberts, 2010; Kang and Gray, 2011). A common thread from such perspectives is that voluntary disclosures are seen to serve a broader and more complex purpose in the organisation’s interactions with its environment as opposed to a narrow, wealth maximising and rational actor logic underpinning the mainstream theoretical predictions. This resonates further when considering the case of non-profit organisations, a context where accountability for “performance” is inherently multi-faceted (i.e. towards beneficiaries, government, public, members, staff and funders) and not primarily driven, or measured, by financial distributions to providers of capital. The four perspectives are now briefly set out alongside a summary of existing studies on HEI voluntary disclosure.

According to Coy et al. (2011, p. 14), public accountability refers “to a public right to know about the condition and performance of the organization under the accountor’s charge”. The authors, drawing from the work of Normanton (1971), refer to an important distinction between “accountability” and “public accountability” in that an accountability process (duty to account, and explain for, one’s actions) does not imply that the process will be visible to outside parties and tends to involve pre-determined actors/parties, and thereby potentially excluding larger constituencies. Contrastingly, public accountability would by default be exercised in an open forum and organisations/managers would be expected to provide all information in the open and be available to public scrutiny. This is why the authors attach significant value to the role of the annual report in that it provides “a wide range of summarized, relevant information in a single document, which enables all stakeholders to obtain a comprehensive understanding of a university’s objectives and performance in financial and non-financial terms. No other single source of such information is available to all stakeholders on a routine basis” (p. 14). Coy et al.’s (2011) also discuss of the importance of public accountability in the form of good stewardship of public institutions as a motivation for disclosure by HEIs. In this regard, public accountability through good stewardship arises from a public service ethos, whereby attempts to abuse delegated power are inherently curtailed and instead power is directed at achieving national objectives and protecting the public interests (Coy et al., 2011). In this case, public accountability in the form of good stewardship of public institutions is rights-based and not utilitarian in nature (Nelson et al., 2003). Hence, Coy et al. (2011) argue that fairness, accessibility and distribution are important concepts that should guide the development of a public accountability and disclosure model in HEIs. This would be consistent with the normative variant of stakeholder theory (Donaldson and Preston, 1995), which sets out that organisations, such as HEIs have to recognise the multiple expectations of its different stakeholders and that it is the HEIs’ duty to provide a full and transparent account of their activities to a wider audience.

Since public sector HEIs have a vital mandate in society in terms of nurturing the knowledge and intellectual base, with a view to fostering social, economic, cultural, political, institutional and individual development, there is, therefore, a clear public interest in ensuring that HEIs operate in accordance with these normative goals, particularly in light of the contemporary threats associated with an overemphasis on managerialism, corporatisation and financial imperatives (Middlehurst, 2013; Parker, 2011), and the concept of public accountability is a key motivation underlying the need for voluntary disclosure that is of sufficient quality and quantity to enable the diverse “public” audiences to hold HEI management to account in an open forum.

However, the empirical evidence over the last two decades from England, Wales and Northern Ireland (EWNI), New Zealand, Australia, Canada and USA (Gray and Haslam, 1990; Coy et al., 1997; Banks et al., 1997; Gordon et al., 2002; Nelson et al., 2003) has indicated very varied levels, and changes in disclosure with wide variations in the types of disclosures. In particular, Banks et al. (1997) found that the sample of EWNI universities had a significantly lower level of disclosure (about 42 per cent) compared to their NZ counterparts (about 95 per cent) with very little change over time (1992-1994), whilst the sample of Canadian universities was the lowest performer with an average score of 25 per cent. It has to be noted that the sample of NZ and Canadian universities were rather small (7 and 16, respectively) relative to the EWNI ones (53 in 1992; 73 in 1994). Using a similar disclosure index, Nelson et al. (2003) found a significant increase in the voluntary disclosure practices of 33 Canadian institutions from 1996 to 2000, albeit that the overall score in 2000 was approximately 36 per cent. Gordon et al. (2002) surveyed 100 US colleges and universities and found an average disclosure level of about 31 per cent. Finally, Coy and Dixon (2004) relied on the PAI to report a significant increase in the level of voluntary disclosure for a sample of 8 NZ universities over a 15-year period from an average of 10 per cent in 1985 to 66 per cent in 2000. With the exception of NZ, and with due consideration of the different disclosure indices used in these studies, the evidence points to a relatively low level of disclosure in spite of several instances of regulatory and governance reforms aimed at enhancing accountability and arguably one may question the extent to which a public accountability perspective can convincingly underpin the observed disclosure behaviour. However, research gaps remain in that to the best of our knowledge, there has not been any study of UK HEIs following Gray and Haslam (1990) and Banks et al. (1997), particularly in light of the significant regulatory, governance and competitive factors faced by the sector.

Interestingly, most of the studies do not explicitly consider the relevance of other theoretical perspectives in light of the empirical evidence. For instance, variability in the disclosure themes may point to the possibility of an instrumental form of stakeholder theory (Ullmann, 1985; Roberts, 1992; Mitchell et al., 1997), whereby HEIs may strategically orient their voluntary disclosures to target and manage their most important stakeholder(s). For example, Nelson et al. (2003) analyses the disclosure trends in the case of Canadian universities and on the basis of interviews with HEI leaders, concludes that the enhanced level of disclosure was required to support fundraising and inform non-governmental funding sources. The stakeholder management concept also implies that some stakeholders may not be targeted in terms of annual report disclosures because they are seen to be less important or that other media of communication may be used. For instance, Banks et al.’s (1997) finding that EWNI universities do not provide a significant number of teaching- and student-related disclosures may be related to the possibility that HEIs were at the time funded by block grants from the government (and not directly by students and, as such students were not seen as key stakeholders) or that the accountability was otherwise made possible to the students via other means (e.g. via student union representatives). In particular, the insights from Mitchell et al.’s (1997) notion of stakeholder salience may prove to be more useful in that the authors assert that the organisation will prioritise (and thus for instance communicate more, and/or placate, using disclosures) stakeholders who are deemed to be powerful, legitimate and/or as a result of an urgent circumstance. In this regard, substantial public sector and HEI funding reforms which, for example, in the UK context, has enabled a higher level of competition (i.e. “market” or “quasi-market”) between universities (for student places) may lead to a shift in the power, legitimacy and urgency of students and parents as key stakeholders relative to say, public funding agencies and research bodies. In a similar vein, concerns expressed by employers about employability and appropriate skills/knowledge of graduates may also lead to a shift in the salience of employers as more powerful, legitimate and “urgent” stakeholders. In turn, voluntary disclosures may become one of the medium by which stakeholder management is achieved, although one of the main issues in the literature has been the difficulty to elaborate upon how disclosures do actually address stakeholder concerns.

Whilst the stakeholder perspective places a great deal of emphasis on the identification and management of key interest groups, legitimacy theory provides a societal-led motivation for voluntary disclosure and are informed by the institutional perspective of organisational behaviour. Organisations, such as HEIs, can only survive or sustain themselves if their activities and objectives are supported by society and as such they are perceived to be legitimate (i.e. “the organisation’s value systems are congruent with the values of the larger social system of which the entity is a part of” (Lindblom, 1994, p. 2). Similarly, according to Suchman (1995, p. 574), “legitimacy is a generalised perception or assumption that the actions of an entity are desirable, proper, or appropriate within some socially constructed system of norms, values, beliefs, and definitions”. If the legitimacy of the organisation is threatened as a result of a particular event, it is argued that the organisation will adopt different strategies to restore its legitimacy and the communication of the activities and actions implemented thereof (e.g. using voluntary disclosures) is viewed as a central plank of the theory (Suchman, 1995; De Villiers and Van Staden, 2006; Soobaroyen and Ntim, 2013). In addition, voluntary disclosures can in themselves become desirable, in that they are proper and appropriate actions deemed to be “expected” of a “professional and well-structured” organisation. Within such a perspective, voluntary disclosures might well be ritualistic and symbolic in nature and, for example, may be the result of a response to a general change in public attitudes and of norms and beliefs towards HEIs. For example, after the introduction of “quasi-market” conditions in the HEI sector primarily in the form of full-tuition fees and competition for students in the UK and a raft of other reforms aimed at improving the efficiency and effectiveness of HEIs activities (FSSG, 2011; UUK, 2011), an external discourse focussed on issues of accountability and transparency can in itself lead to more disclosure primarily as an organisation perceives that such additional disclosure equates to “more accountability” and is, therefore, in line with the socially constructed system of norms, values and beliefs. Furthermore, Suchman (1995) refers to the process of “strategic legitimacy”, where organisational decision makers effectively “scan” their environment and respond to legitimacy threats. According to Suchman (1995), different dynamics or “conduits” exist by which organisational actors can manage their legitimacy (pragmatic, moral and cognitive). Pragmatic legitimacy (Soobaroyen and Ntim, 2013) can be seen as one that is achieved as a result of fulfilling direct exchanges (financial or otherwise) with immediate target audiences (e.g. funders, students and employers).

In contrast, moral legitimacy is not specifically aimed at a particular audience, but rather it is the result of the organisation visibly demonstrating an affiliation to moral values and beliefs. Suchman (1995) further breaks down moral legitimacy into consequential (meeting acceptable outputs), procedural (adoption of best practices) and structural forms (organisation has characteristics that are intrinsically worth of support). In this regard, non-profit and similar organisations, such as HEIs, exist in order to meet normative goals (e.g. education and research) and whilst they are subject to many attempts to be evaluated according to instrumental- and consequential-led measures (e.g. number of graduates, student employability ratios, NSS, research or teaching excellence framework and value of research funding). An HEI’s legitimacy is also assessed more broadly in terms of the practices it adopts (e.g. external examining, subject benchmarks and research ethics) and also the fact that the HEIs have historically attracted support. Therefore, one expects that voluntary disclosures can be relied upon to communicate or reinforce the HEI’s multiplicity of outputs (consequences), best practices (procedural) and historicity (structural). Relatedly, Parker (2013), and to some extent Nagy and Robb (2008), provide an account of how HEIs globally, including those in the UK, have gradually internalised private-sector- and competitive-led practices in teaching and research activities, emphasising revenue generation, financial logics of efficiency, value-for-money and quantitative-led management controls, such as key performance indicators. In so doing, they are responding to external expectations of “performance”, but at the same time, Parker (2013) suggests that universities, like companies, will also enhance their level of voluntary disclosure on a selective basis (e.g. refer to Coy and Pratt, 1998) to ensure that a good impression of their activities is communicated to the wider audience, albeit that information on such a basis may not be a comprehensive reflection of public accountability. Nonetheless, it is quite puzzling to note that the legitimacy motivation features rarely in the HEI voluntary disclosure literature. In their study of 44 Canadian HEIs, Maingot and Zeghal (2008) empirically test for the association between university mission/objective, and size on the level of voluntary disclosure of performance indicators. It was found that that each of these variables was positively associated to the level of voluntary disclosure and the authors conclude that the findings are consistent with legitimacy theory. However, we would argue that their findings are limited given the univariate nature of the analysis, the exclusive focus on performance indicators, and other important variables, such as governance, have not been explicitly considered.

The final theoretical perspective of interest is resource dependence, which is primarily concerned with the critical influence of external organisations on organisational behaviour and the power relations underlying the relationship between the different organisations. According to Pfeffer (1987), the basic premise of the theory is that the fundamental units for understanding inter-corporate relations and society are organisations. These organisations are not autonomous, but are rather constrained by a network of interdependencies with other organisations as they seek to access the relevant resources (e.g. financial, human resources, information and legitimacy) to continue operating. In a context marred by uncertainty about the actions that may be taken by the government and regulatory authorities, organisations tend to take proactive actions (e.g. disclose more information, change strategies and appoint more external board members) to manage the interdependencies, but such actions are not always fully successful, leading to new patterns of dependencies and interdependencies. Over time, these changing patterns generate positions of power both within and outside the target organisation. In the context of the non-profit literature (e.g. Callen et al., 2010; Verbruggen et al., 2011; Verschuere and De Corte, 2014), it is argued that resource dependence has provided a framework to model the behaviour of non-profit organisations in relation to its powerful resource providers and in particular, various studies suggest that such organisations are prone to volatility in their access to resources and often depend on multiple sources to ensure they can continue to meet their objectives. As a result, organisations may be compelled to implement practices that are primarily for the benefit of the resources provided (e.g. Verbruggen et al., 2011). In response to such circumstances, organisations do attempt to reduce uncertainties and resource shortages by maintaining autonomy, resisting pressures from, and/or managing their interdependencies with, external groups. Currently, UK public HEIs remain highly reliant on key resources for their survival (e.g. teaching income, international students, research income, enterprise activities, human capital, space and reputation/rankings) and the resource dependence theoretical perspective either suggests that the external organisations, which control these resources can have power over the HEI and thereby pressure it to operate according to its expectations or that the HEI is able to resist this power and maintain an autonomy (Verschuere and De Corte, 2014).

The relevance of resource dependence theory in accounting and voluntary disclosure is gradually emerging in the accounting literature, but its implications have mostly been considered in relation to the role of board and governance structures in influencing the level of disclosure in private profit-making organisations (Ntim and Soobaroyen, 2013a, b). In particular, one of the key strategies outlined in resource dependence theory to address power imbalances and uncertainties from the external environment is to tailor the organisation’s board composition to ensure a more stable control of the flow of resources for the organisation (Hillman et al., 2009). According to Pfeffer and Salancik (1978; cited in Hillman et al., 2009), directors can bring four benefits to organisations: information in the form of advice and counsel; access to channels of information between the firm and environmental contingencies; preferential access to resources; and legitimacy. Based on an extensive review of the literature, Hillman et al. (2009) conclude that these benefits brought to the board do flow to the organisations and, therefore, there is strong support for the continued practice of co-opting “resource-rich” (Hillman et al., 2009) directors – a practice we can anecdotally attest to in the case of the recent composition of UK HEI governing boards. In terms of the voluntary disclosure effects within an resource dependence theoretical perspective, the current conclusions and evidence seems to suggest that resource providers would respond positively to voluntary disclosure and improve organisational access to resources, in a similar vein to the stakeholder theoretical predictions (Chen and Roberts, 2010; Ntim and Soobaroyen, 2013a, b). However, one might argue that voluntary disclosure can also disrupt the delicate balance of the interdependencies between two organisations by revealing information that is crucial to one organisation and, therefore, lead to a power imbalance. Finally, the various insights by Parker (2002, 2011, 2012, 2013), Nagy and Robb (2008) and Taylor (2013a, b) also suggest that there has been a significant change in the way HEIs appear to have attempted to manage their dependencies and interdependencies in the wake of decreased public funding and regulatory reforms, and primarily have led to the adoption of practices and strategies to ensure an alignment to external expectations rather than reflect resistance or autonomy.

In conclusion, public accountability, legitimacy, resource dependence and stakeholder theories provide an overlapping theoretical framework to consider the extent and determinants of voluntary disclosures in UK HEIs. Given the broader social and political factors underpinning the activities of the UK HEI sector, we contend that the above-mentioned theories may offer a richer and more complex set of potential explanations for the cross-sectional differences in voluntary disclosure behaviour.

Governance and voluntary disclosure in HEIs: prior empirical studies and hypotheses development

Informed by insights from previous empirical studies on voluntary disclosure in HEIs (e.g. Gray and Haslam, 1990; Coy et al., 1991, 1994, 1997, 2011; Cutt et al., 1993; Dixon et al., 1991; Banks et al., 1997; Coy and Pratt, 1998; Gordon et al., 2002; Nelson et al., 2003; Coy and Dixon, 2004), general voluntary disclosure within the corporate sector (e.g. Eng and Mak, 2003; Collett and Hrasky, 2005; Barako et al., 2006a, b; Cheng and Courtenay, 2006; Chau and Gray, 2010; Adelopo, 2011; Jetty and Beattie, 2012), internal governance (Carter et al., 2003; Gompers et al., 2003; Van der Walt and Ingley, 2003; Beiner et al., 2006; Cheng et al., 2008; Coles et al., 2008; Guest, 2009; Bozec and Bozec, 2012) and the UK HEI setting literature (e.g. Jarrat, 1985; Nolan, 1995/1996; Dearing’s 1997; Lambert’s (2003); Committee of University of Chairmen (CUC), 1995/1998/2000/2004/2009; Schofield, 2009; Browne, 2010), we identified the potential antecedents of voluntary disclosures. Specifically, we examine how a number of internal governance mechanisms, including governing board size (GBSIZE), IGOV, frequency of governing board meetings (GBMs), governing board diversity (GBDIV), audit committee quality, the presence of a governance committee (GCOM) and audit firm quality/size impact on an HEI’s level of voluntary disclosure.

Research design

Empirical findings and discussion

Overall discussion, implications and conclusions

Internationally, the HE sector has and continues to experience rapid changes and/or reforms (Jones et al., 2001; Bennett, 2002; Knight, 2002; Salter and Tapper, 2002; Oxholm, 2005; Toma, 2007; Hordern, 2013; Middlehurst, 2013; Taylor, 2013a, b). Specifically, the international HE environment has been characterised by large student numbers, low-government funding often driven by public sector budget cuts, but tight control and regulation, high levels of national and international competition, more enlightened multiple stakeholders, and mass importation and application of neo-liberal economic ideas mainly in the form of NPM techniques into HEIs (Shattock, 1998, 1999; Dearlove, 2002; Middlehurst, 2004; Kim, 2008; Trakman, 2008; Melville-Ross, 2010; Parker, 2011; Parry, 2013; Rowlands, 2013). These changes and/reforms have brought greater emphasis on financial imperatives, the need for operational efficiency, strong internal governance and heightened discourses of “accountability” and “transparency” (Hordern, 2013; Middlehurst, 2013; Parry, 2013; Rowlands, 2013; Taylor, 2013a, b). In particular, the implementation of the recommendations of the Browne (2010) report on UK HE funding precipitated largely by the 2007/2008 global banking crisis and subsequent deep cuts in HE sector funding in 2010 by the UK Central Government has led to concerns about financial sustainability, efficiency, effectiveness and competitiveness (UUK, 2011). This has motivated us to first consider how HEI voluntarily disclose information in their annual reports as a mechanism of external accountability and transparency, and second whether extant governance structures, borne out of several UK HE reforms, play a role in improving public accountability.

First, using a very recent data set from 130 UK HEIs, we find that there is wide variability in the level of voluntary disclosures, but the overall score is 44.02 per cent (42.25 per cent) with limited differences between pre-1992 and post-1992 HEIs. Whilst we did not explicitly compare our summary voluntary disclosure measure (the PATI) level in 2012 to previous years, our reading of the evidence from the fairly dated UK studies (e.g. Gray and Haslam, 1990; Banks et al., 1997) shows very little improvement in the level of voluntary disclosures. For example, Banks et al. (1997) find that the disclosure level by a sample of HEIs (53, 59 and 79 institutions, respectively) in 1992, 1993 and 1994 remained almost stable at about 40 per cent of the maximum disclosure score. A similar pattern, but marginally lower level of disclosure, is found for the case of Canadian institutions (Nelson et al., 2003) and US universities and colleges (Gordon et al., 2002), and the only exception has been the case of NZ universities (Coy and Dixon, 2004). The disclosure pattern on a sub-theme level is not overtly different although it is found that financial- and community-led disclosures achieve higher scores than teaching- and research-related ones. Several, and not necessarily competing explanations, can be put forward for the relatively low disclosure level and the apparent lack of change from previous studies. First, it may be argued that the 2010 reforms, whilst arguably having far reaching consequences compared to previous changes, had yet to have a full impact on university voluntary disclosure strategies in 2012. Thus, ours is a timely study examining voluntary disclosure behaviour of UK HEIs in the first year of implementing major changes/reforms to funding and hence, arguably relatively short for the anticipated major cultural shift in voluntary disclosure behaviour to be realised. Second, the emphasis of our study on annual report disclosures does not consider the possibility that HEIs rely on other forms of public communication (e.g. websites, press releases, media coverage of teaching and research performance), which may have increased as a result of the contextual pressures, with an expectation of the latter having a greater impact and which may be more amenable to the dissemination of “good” news outside of a formal accountability mechanism, such as the annual report. Third and although methodologically similar in orientation, the Coy and Dixon’s (2004) voluntary disclosure measure, which we adopted is slightly different in content compared with those used by prior UK studies and thus, not constituting a like-for-like comparison of voluntary disclosure levels. For example, the summary voluntary disclosure measure used by Banks et al. (1997, pp. 216-217, 220) and Nelson et al. (2003, pp. 84, 88, 92) consisted of 26 voluntary disclosure items compared with 58 in Coy and Dixon’s case (PAI) and 57 in our case (PATI). Thus, our PATI may not be necessarily capturing like-for-like improvements or changes in the levels of voluntary disclosures by UK HEIs in relation to those reported by prior UK studies. Finally, and perhaps more importantly, the heavily regulated and funding context of the UK, whereby universities already provide information (often on a private or aggregated basis) to various agencies (HESA, funding councils – DENI, HEFCE, HEFCW and SHEFC, and grant agencies, fair access regulators, research panels, accreditation bodies) may have led to a situation, whereby the primacy of such stakeholders and resource providers is already addressed and/or managed using “privileged” or “private” forms of communication and accountability[9]. As a result, public and comprehensive displays of performance, actions and activities in the annual report are less emphasised, thereby plausibly leading to our results. One implication thereof is that Coy et al.’s (2011) expectation of “fairness, accessibility and distribution” (p. 26) germane to the authors’ concept of public accountability does not seem to be materialising, or at least improving, in the UK sector, and we would go as far as conjecture that similar patterns might be at play in other countries where the HEI sector faces similar pressures (e.g. Australia, as per Nagy and Robb, 2008). As a consequence, and as predicted by Coy et al. (2011), “accountability” to the few is heightened whilst the potential for open challenge on the basis of comprehensive “public accountability” disclosure is limited and arguably may be contributing to the rise of, and a lack of resistance to, a corporatised university model. Drawing from Parker (2011), two additional implications can be related to the apparent focus on financial-led voluntary disclosures relative to other types of disclosures and the lack of significant differences between pre- and post-1992 institutions. The former may signal the changing mission and strategy of universities towards commercialisation and corporatisation, whilst the latter may be symptomatic of a behaviour of homogeneity across HEIs to respond to similar coercive pressures from regulators and dominant funders. Informed by the above, we would also conclude that the instrumental motives of stakeholder and resource dependencies are more prevalent explanations of the current pattern of disclosures, compared to the seeking of legitimacy and public accountability to the broader social constituencies.

Second, and in spite of the various governance reforms introduced in the UK HEI sector over the past 30 years (i.e. since the Jarratt’s (1985) report), there has been virtually no detailed examination of the effectiveness of the governance reforms with the exception of anecdotal findings and discussions arising from the failure of specific governing boards to monitor or oversee HEI management. Yet, concerns about the effectiveness and impact of HEI governance work remain very topical (e.g. Schofield, 2009; Greatbatch, 2012). In this respect, our results bring much needed evidence on the contribution of governing bodies to the extent of voluntary disclosure. Specifically, we find that GBDIV, independent or lay governors, the presence of a GCOM and audit committee quality are positively related to the extent of voluntary disclosure. By contrast, we find that GBSIZE, the frequency of GBMs, and the audit firm size do not have any significant impact on voluntary disclosure. Since there are very few studies which explicitly examine the link between accountability disclosures, governance and other HEI characteristics, the scope for comparison is quite limited. Nonetheless, we concur with Gordon et al.’s (2002) results that audit firm size, board size and leverage have no significant impact on the extent of voluntary disclosures. One implication of this finding is a potentially inadequate policy on the reduction of board size in the current CUC guidance, with reported mean and median figures being still very close to the maximum threshold (i.e. 25 – a number that is considered to be very far from the normal expectations for an effective board in the corporate sector of ten). Such an unwieldy structure may potentially jeopardise the ability of a governing board to be sufficiently cohesive and decisive to have an influence or bearing on university management. Notwithstanding, the results on the significant positive variables collectively points out that the real emphasis needs to be on the composition, expertise, diversity and independence of the board which, at this stage, is not sufficiently outlined in the CUC code. As an illustration of the issue, it is probably telling that a recent consultation in Scotland on determining the structure of HEI governing boards (Von Prondzynski, 2012; Havergal, 2015b) saw on one hand, broad support by HEIs for more women representation, but on the other hand, fierce resistance to the recommendation that the chair (and staff/student members) be directly elected as opposed to being appointed. In effect, our results would support the latter recommendation in that currently HEIs with independent and more diverse governing boards tend, on average, to demonstrate more commitment towards public accountability and disclosure.

Third, and distinctively, we find that university executive team structures have a significant moderating effect on the association between internal governance mechanisms and voluntary disclosure. In particular, we find that university ETSIZE, the frequency of executive team meetings and university ETDIV strengthens internal governance-voluntary disclosure association. Thus, our finding offers support for the idea that HEI internal governance arrangements which emphasise a “shared” leadership team, consisting of senior academic executives and governing boards dominated by externally appointed independent or lay governors (Shattock, 1998, 1999; Bennett, 2002; Dearlove, 2002; Knight, 2002; Salter and Tapper, 2002; Middlehurst, 2004, 2013; Taylor, 2013a). Conversely, the lack of a “shared” form of governance, where either the executive management adopts a corporatised authoritarian style of decision making (Parker, 2011) or where governing boards purely or primarily operate as monitoring mechanisms will not be associated with a higher level of voluntary disclosure. At a time when many commentators are highlighting the rise of the corporatised university (Middlehurst, 2013; Nagy and Robb, 2008; Parker, 2013), and of its associated top-down “scientific management” style (Parker, 2011), the interaction results suggest that a democratic form of governance may still be the most appropriate and effective way of achieving not only better accountability, but also better outcomes, both from a managerial and academic perspective. We, therefore, call for further research to examine more closely the determinants of HEI financial and non-financial performance, with an emphasis on the influence of governance arrangements and executive team characteristics such that an evidence can be obtained on the appropriateness and effectiveness, of private-sector models of governance that have been employed in the HEI sector. In particular, future research can examine the extent to which the “shared” governance model is able to resolve potential conflicts and maintain harmonious work relationships among governors, chair of governors and the vice-chancery that can result in improvement in trust, performance and reputation of the institution.

Fourth, our findings have important policy, practical, regulatory and theoretical implications. On the one hand, our evidence suggests that good internal governance structures tend to enhance accountability and transparency within HEIs, yet internal governance structures still differ substantially among UK HEIs. On the other hand, our evidence also shows the need to review some of the guidance in relation to GBSIZE, independence and diversity. Collectively, the study offers regulatory authorities, policy makers and stakeholders, such as the CUC, various funding agencies (i.e. DENI – Northern Ireland, HEFCE – England, HEFCW – Wales and SHEFC – Scotland), the LFHE, accountancy bodies, employee and student unions, and research funding councils a greater impetus to review, strengthen, monitor and enhance compliance with governance rules. With regards to voluntary disclosures, we would also suggest that appropriate sector-based institutions, such as the British Universities Finance Directors Group, may consider developing voluntary disclosure guidance and seek regulatory backing for such guidance. Thus, from a policy and regulatory perspective, establishing a sector wide enforcement and compliance body that will specifically monitor the levels of compliance and disclosure of relevant governance and voluntary reporting requirements can be a step in the right direction. For governors, executives and managers of HEIs, our evidence suggests that there is the need for a major shift in their governance, reporting and voluntary disclosure practices. The introduction of full-tuition fees and the transfer of student funding from funding bodies (e.g. HEFCE) to the Students Loans Company (SLC), for example, signals the emergence of new and powerful stakeholders (e.g. alumni, SLC, parents, prospective students and employers) who need to be equally carefully managed and satisfied in order for HEIs to maintain sustainable operations. Similarly, market-like conditions and direct competition has been introduced in the UK HEI sector with the removal of caps on the number of students that can be admitted by an HEI. Arguably, in this new competitive and market/quasi-market environment, accountability will need to be moved beyond private accountabilities (e.g. accountability returns) to traditional stakeholders, such as funding councils to broader public accountability to new and emerging equally powerful stakeholders, such as alumni, students and parents. One way by which such public accountability can be achieved is to produce comprehensive annual reports. Specifically, annual reports should not only contain comprehensive disclosures relating to the financial performance of the HEIs, but also important voluntary non-financial disclosures relating to a wide range of relevant issues, such as governance and risk management, teaching and research quality, career and employability prospects, alumni, accessibility and social mobility issues, human resource and intellectual capital, academic and international reputation, and social, environmental and community contributions, amongst others. From our multi-theoretical perspective, therefore, HEIs that will be able to commit to greater public accountability (public accountability theory) through increased voluntary disclosures may not only enhance their legitimate right to exist (legitimacy theory), but may gain the support of powerful stakeholder (stakeholder theory), such as alumni, communities, parents and students, who may offer them access to critical resources, such as capital (e.g. tuition fees), that are necessary for maintaining sustainable operations.

Finally, our findings are robust across a raft of econometric models that adequately account for different types of endogeneities, as well as alternative internal governance and disclosure measures. Yet, its limitations need to be clearly acknowledged. As a result of the labour intensive nature of the data collection, our sample is limited to UK HEIs. Future studies may use a longitudinal data set within a country or cross-country context, which may arguably enhance the generalisability of their findings, and also consider more explicitly whether one theoretical perspective better explains voluntary disclosures relative to other theories. Similarly, due to data limitations, our analyses have focussed mainly on internal governance structures. Future studies may improve their analysis by investigating how external governance mechanisms, such as external regulations (e.g. from funding and research agencies), central government policies, student and employee unions’ activism, economic factors and competition drive voluntary public accountability disclosure practices. In addition, as we examine the introduction of a “market or quasi-market” HE sector in the UK in its first year of operation in which its full impact might not have been realised, future studies may provide new insights by re-examining our evidence and rely on our voluntary PATI-related disclosure models to enable comparisons over time. Moreover and similar to all prior quantitative-oriented archival studies of this nature, our measures for governance and voluntary disclosures may or may not fully reflect how HEI executives, governors, academics, managers, regulators and funding bodies operate in practice, and thus our evidence of cross-sectional associations among governors, HEI executives and voluntary disclosure should be treated with some caution. In this case, future research may improve on our findings by conducting more in-depth analysis by, for example, interviewing HEI executives, governors, academics, students, funding and research bodies, internal and external auditors, regulators and policy makers relating to governance, performance and public accountability issues.