*2.2. Power Concentration and TADV*

Although much attention has been paid to the role of boards (Daily et al. 2003), many small firms do not have formal boards but only a unique manager who concentrates on all the functions of the board, while managers and owners are often overlapping. Occasionally, in addition to the founder or owner-manager, there may also be one or two family members on the board, with a unique way of making decisions (Gabrielsson 2007). The varying power concentration among private firms grounds the first dimension that could condition SMEs' decisions concerning timely information disclosure violations. This dimension is relevant, as the agency theory posits that adequate monitoring or control mechanisms need to be established to protect stakeholders from conflicts of interests (Kiel and Nicholson 2003; Parsa et al. 2007), therefore avoiding information asymmetry. In general, more power concentration in a firm's board suggests less pressure for disclosing information as there is less demand for transparency (Carney 2005; Beuselinck and Manigart 2007). Thus, the first proposition (P1) about corporate governance dimensions states that:

P1: Larger power concentration will increase the likelihood of TADV.

In relation to the need for concrete information disclosure policy by firms' decision-makers, there are two corporate governance characteristics that measure the power concentration of decision-making, namely ownership concentration and managerial ownership. The former means whether firms have a high concentration of ownership in one or a few large shareholders that own the majority of shares in the firm. High levels of ownership concentration foster risk-taking (Nguyen 2011). The concentration of ownership and the unification of ownership and control may lead to managers being subjected to less pressure from outside investors who demand accountability and transparency (Carney 2005). In private firms, concentrated ownership means that large shareholders tend to have less interest in disclosing information because they are well informed of what is happening in the firm. In the same

line, Beuselinck and Manigart (2007) argue that private equity firms with majority shareholders are likely to have lower-quality financial reporting systems compared to those with minority shareholders only. Additionally, if decision-making is concentrated, firm risk behaviour can be assimilated with that of the owner. Taking the prior reasoning into account, the first hypothesis (H1a) related to the power concentration proposition is as follows:

## **Hypothesis 1a.** *Ownership concentration will increase the likelihood of TADV.*

The second corporate governance variable to capture power concentration is managerial ownership, focused on the shares owned by their own managers, that is, the involvement of owners in running a firm. Most SMEs are closely held, and owner-managed (Brunninge et al. 2007), and consequently, they do not disclose much information, because they do not need to make it public. Moreover, managers of those firms have much information "in the head" (Uhlaner et al. 2007). Accordingly, we posit the second hypothesis (H1b) concerning the power concentration proposition:
