Articlehybrid2017

The impact of corporate governance mechanisms on financial reporting transparency

Samin Kohansal · Shoeyb Rostami · Zeynab Rostami

12 citations0/0 files storedCorporate Ownership and Control

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

Abstract

Corporate governance has been raised as one of the most important issues among the international business environment since the beginning of the twenty-first century. At first, corporate governance basic principles focused on firm’s strategies and the rights of their shareholders but these principles has been changed into the rights of all stakeholders and society through researchers new viewpoints. Although corporate governance codes and regulations are different in various countries, there is a common unanimity that better compliance of corporate governance improves financial reporting quality and transparency. The aim of this paper is to investigate the impact of corporate governance mechanisms on financial reporting transparency in Tehran Stock Exchange over a seven year period (from 2006 to 2012). Besides we have specially reviewed related researches and topics about corporate governance in various countries which their results were discussed in different parts of the article. In order to examine the hypothesis a sample of 67 companies is used. In this paper we used ownership concentration, institutional ownership, board independence, board size, CEO duality and CEO tenure as the corporate governance mechanisms. We also used earnings management behavior by employing Kasznik model (the absolute value of abnormal accruals) as a measure of financial reporting transparency. To test research hypothesis a multiple regression with estimated generalized least square method is employed. The findings indicate that ownership concentration, institutional ownership, board independence and CEO tenure has positively affected financial reporting transparency through earnings management behavior. On the other hand board size and CEO duality has negatively affected financial reporting transparency through earnings management behavior.

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References

1976Theory of the firm: Managerial behavior, agency costs and ownership structure 1983Separation of Ownership and Control 1997A Survey of Corporate Governance 1993The Modern Industrial Revolution, Exit, and the Failure of Internal Control Systems 1985The Structure of Corporate Ownership: Causes and Consequences 2003Corporate Governance and Equity Prices 1990Performance Pay and Top-Management Incentives 2002Audit committee, board of director characteristics, and earnings management

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