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Corporate governance and financial reporting quality during the COVID-19 pandemic

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  • Hsu, Yu-Lin
  • Yang, Ya-Chih

Abstract

This paper analyzes whether COVID-19 affects the financial reporting quality of companies and whether corporate governance has a mitigating effect. Using data from UK listed companies, we show that the quality of companies’ financial reporting has been lower during the pandemic. Specifically, companies have engaged in more earnings management through real activities during the pandemic. We also find that a larger board helps to mitigate the negative impact of COVID-19 on financial reporting quality, although we find no mitigating effect for board independence and CEO duality. This paper provides additional evidence on the impact of COVID-19 on financial reporting quality using a strong country-level governance setting. It is also the first study to analyze the mitigating effect of corporate governance on financial reporting quality during the COVID-19 pandemic. The results of this study provide useful suggestions to the practice.

Suggested Citation

  • Hsu, Yu-Lin & Yang, Ya-Chih, 2022. "Corporate governance and financial reporting quality during the COVID-19 pandemic," Finance Research Letters, Elsevier, vol. 47(PB).
    • Handle: RePEc:eee:finlet:v:47:y:2022:i:pb:s1544612322000915
    DOI: 10.1016/j.frl.2022.102778
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    3. Fasano, Francesco & Javier Sánchez-Vidal, F. & La Rocca, Maurizio, 2022. "The role of government policies for Italian firms during the COVID-19 crisis," Finance Research Letters, Elsevier, vol. 50(C).
    4. Alsuhaibani, Waleed & Houmes, Robert & Wang, Daphne, 2023. "The evolution of financial reporting quality for companies listed on the Tadawul Stock Exchange in Saudi Arabia: New emerging markets' evidence," Emerging Markets Review, Elsevier, vol. 55(C).
    5. Francesco Fasano & Maurizio La Rocca & F. Javier Sánchez-Vidal & Maria Josephin Lio & Alfio Cariola, 2024. "How Local Finance and Enforcement Shaped SME Credit Choices before and during the COVID Crisis," IJFS, MDPI, vol. 12(1), pages 1-16, January.
    6. Hung Chi Chen & Hsiang-Tsai Chiang & Dessy Voren, 2023. "The Impact of the COVID-19 Pandemic on Quality of Financial Reports," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 13(4), pages 1-1.
    7. Joanna Lizińska & Leszek Czapiewski, 2023. "Earnings Management amid the COVID-19 Financial Crisis: The Experience of Poland," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 1, pages 93-112.

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