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Accountability and value enhancement roles of corporate governance

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  • Ping‐Sheng Koh
  • Stacie Kelley Laplante
  • Yen H. Tong

Abstract

We examine the twin roles of accountability and value enhancement of corporate governance in the context of financial reporting. We investigate the accountability role by examining the association between governance structures and abnormal accruals, and the value enhancement role by investigating the association between abnormal accruals explained by governance structures and future performance. We differentiate between governance mechanisms that have direct roles in the financial reporting process (audit related) from mechanisms that have indirect roles (board related). We find that independent and active audit committees and independent boards are important governance attributes for financial reporting. We show that both audit‐related and board‐related governance structures are value enhancing.

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  • Ping‐Sheng Koh & Stacie Kelley Laplante & Yen H. Tong, 2007. "Accountability and value enhancement roles of corporate governance," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 47(2), pages 305-333, June.
    • Handle: RePEc:bla:acctfi:v:47:y:2007:i:2:p:305-333
    DOI: 10.1111/j.1467-629X.2006.00207.x
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    2. Richard Anthony Kent & Di Bu, 2020. "The importance of cash flow disclosure and cost of capital," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 60(S1), pages 877-908, April.
    3. Nimisha Kapoor & Sandeep Goel, 2017. "Board Characteristics, Firm Profitability and Earnings Management: Evidence from India," Australian Accounting Review, CPA Australia, vol. 27(2), pages 180-194, June.
    4. Peter Baxter & Julie Cotter, 2009. "Audit committees and earnings quality," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 49(2), pages 267-290, June.
    5. David Hay & Jenny Stewart & Nives Botica Redmayne, 2017. "The Role of Auditing in Corporate Governance in Australia and New Zealand: A Research Synthesis," Australian Accounting Review, CPA Australia, vol. 27(4), pages 457-479, December.
    6. Shimin Chen & Bin Srinidhi & Lixin (Nancy) Su & Jamie Y Tong, 2018. "The separate and joint effects of the market for corporate control and board effectiveness on R&D valuation," Australian Journal of Management, Australian School of Business, vol. 43(2), pages 203-224, May.
    7. Won Sil Kang & Alan Kilgore & Sue Wright, 2011. "The effectiveness of audit committees for low- and mid-cap firms," Managerial Auditing Journal, Emerald Group Publishing, vol. 26(7), pages 623-650, July.
    8. Liyu He & Sue Wright & Elaine Evans, 2021. "The impact of managerial discretion on fair value information in the Australian agricultural sector," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(S1), pages 1897-1930, April.
    9. Dominique Dufour & Philippe Luu & Pierre Teller & Elodie Benham, 2018. "Qualité de l’information comptable et codes de gouvernement d’entreprise," Post-Print hal-01907848, HAL.
    10. Husam Aldamen & Keith Duncan & Simone Kelly & Ray McNamara, 2020. "Corporate governance and family firm performance during the Global Financial Crisis," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 60(2), pages 1673-1701, June.
    11. James Routledge & David Morrison, 2012. "Insolvency administration as a strategic response to financial distress," Australian Journal of Management, Australian School of Business, vol. 37(3), pages 441-459, December.
    12. Wael Almaqoushi & Ronan Powell, 2021. "Audit committee quality indices, reporting quality and firm value," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 48(1-2), pages 185-229, January.
    13. C. Piot & L. Kermiche, 2009. "A quoi servent les comités d'audit ? Un regard sur la recherche empirique," Post-Print halshs-00537952, HAL.
    14. Mark Wilson, 2011. "Earnings Management in Australian Corporations," Australian Accounting Review, CPA Australia, vol. 21(3), pages 205-221, September.
    15. Petros Kalantonis & Andreas Errikos Delegkos & Emmanouela Sotirchou & Aristidis Papagrigoriou, 2022. "Modern business development and financial reporting: exploring the effect of corporate governance on the value relevance of accounting information—evidence from the Greek listed firms," Operational Research, Springer, vol. 22(3), pages 2879-2897, July.
    16. Nico Lehmann, 2016. "The role of corporate governance in shaping accruals manipulation prior to acquisitions," Accounting and Business Research, Taylor & Francis Journals, vol. 46(4), pages 327-364, June.
    17. Mohammad I Azim, 2012. "Corporate governance mechanisms and their impact on company performance: A structural equation model analysis," Australian Journal of Management, Australian School of Business, vol. 37(3), pages 481-505, December.
    18. Liyu He & Sue Wright & Elaine Evans & Susan Crowe, 2009. "What makes a board independent? Australian evidence," Accounting Research Journal, Emerald Group Publishing Limited, vol. 22(2), pages 144-166, September.
    19. Pamela Kent & James Routledge & Jenny Stewart, 2010. "Innate and discretionary accruals quality and corporate governance," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 50(1), pages 171-195, March.
    20. Dewaelheyns, Nico & Eeckloo, Kristof & Van Herck, Gustaaf & Van Hulle, Cynthia & Vleugels, Arthur, 2009. "Do non-profit nursing homes separate governance roles?: The impact of size and ownership characteristics," Health Policy, Elsevier, vol. 90(2-3), pages 188-195, May.

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