Military-experienced directors, CEO busyness and financial statement footnotes readability: evidence from Indonesia

Abstract

Purpose

This study examines the relationship between the characteristics of militarily experienced directors and financial statement footnote readability. The second research question considers whether CEO busyness impacts the relationship between military-experienced directors and financial statement footnotes readability.

Design/methodology/approach

We use nonfinancial listed firms on the Indonesian Stock Exchange from 2010 to 2018, which amounted to 1,002 firm-year observations. We test the hypotheses and use fixed effects and Heckman's two-stage regression.

Findings

This study documents a negative relationship between military directors and financial statement footnote readability. We extend this relationship by factoring board busyness into the equation. We find that the presence of military-connected and busy CEOs negatively impacts the readability of financial statement footnotes. The results remain robust after additional analyses.

Research limitations/implications

Future research should consider a more robust measure of military-experienced directors. A broader context of directors' busyness should be considered, such as including multiple directorships.

Originality/value

We revisit the literature on military-experienced directors by considering political connections as one of the proxies for military connections in Indonesia. The findings largely support the convergence of the political connections literature in which rent-seeking activities are prevalent and prevent sound financial reporting.

Citation

Abdul Wahab, E.A., Harymawan, I., Wardani, D.A.K. and Nasih, M. (2025), "Military-experienced directors, CEO busyness and financial statement footnotes readability: evidence from Indonesia", Asian Review of Accounting, Vol. 33 No. 1, pp. 18-42. https://doi.org/10.1108/ARA-09-2023-0246