Articlegreen2007

Corporate Governance, Accounting Outcomes, and Organizational Performance

David F. Larcker · Scott Anthony Richardson

1,536 citations0/0 files storedThe Accounting Review

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Auditing, Earnings Management, Governance Corporate Finance and Governance Corporate Governance and Financial Management

Abstract

The empirical research examining the association between typical measures of corporate governance and various accounting and economic outcomes has not produced a consistent set of results. We believe that these mixed results are partially attributable to the difficulty in generating reliable and valid measures for the complex construct that is termed “corporate governance.” Using a sample of 2,106 firms and 39 structural measures of corporate governance (e.g., board characteristics, stock ownership, institutional ownership, activist stock ownership, existence of debtholders, mix of executive compensation, and anti-takeover variables), our exploratory principal component analysis suggests that there are 14 dimensions to corporate governance. We find that these indices have a mixed association with abnormal accruals, little relation to accounting restatements, but some ability to explain future operating performance and future excess stock returns.

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References

1989Structural Equations with Latent Variables 1991Structural Equations with Latent Variables.1997A Survey of Corporate Governance 1991Earnings Management During Import Relief Investigations 2005Performance matched discretionary accrual measures 1988Management ownership and market valuation 1996Higher market valuation of companies with a small board of directors 1985The Structure of Corporate Ownership: Causes and Consequences

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