Corporate governance of audit firms: Assessing the usefulness of transparency reports in a Europe-wide analysis (original) (raw)

AUDIT REPORTING AND CORPORATE GOVERNANCE: LINKS AND IMPLICATIONS

Financial scandals of the last decade have had a negative effect upon the trust and perception of investors regarding auditor responsibility and their part in fraud and error detection. As a result of legal conditions and regulations, audit firms in some jurisdictions have recently started to compile transparency reports, which contain information regarding corporate governance compliance of audit firms. This study aims to investigate if corporate governance has a significant effect on audit reporting and audit quality. Thus, our starting point is the definition of corporate governance, with an emphasis on the transparency principle for efficient corporate governance. We aim to analyse how this principle influences the quality level of the audit report, through a qualitative study. Keeping in mind that corporate governance in audit firms is considered to have a noteworthy effect on audit quality, we expect to find that regulatory bodies expect more transparency from these firms, therefore increasing competitiveness among audit firms concerning audit quality.

Corporate Governance Disclosure – an International Overview of Research Trends

ECONOMICS AND MANAGEMENT, 2012

Our paper approaches "corporate governance disclosure" concept from a different perspectivethe researchers one-presenting an overview image of what has already been studied, analyzing and discussing the trends of research on this topic, which is important to all researchers interested on it. The main reason of focusing our research in this area was the continuously increasing importance given to corporate governance and transparency, as a consequence of the most recently corporate failures and accounting scandals, not only among regulatory authorities and at companies' level, but in academic environment, too, where we have assisted at an increasingly interest in measuring the level of transparency by developing disclosure indices in this respect. Thus, unlike previous research studies which were focused on a specific aspect of corporate governance disclosure our paper provides a different approach, by analyzing the trend of research studies focused on disclosure indices developed for measuring the level of transparency and their possible relationship with the most important corporate governance attributes.

Corporate governance disclosure: Empirical evidence in the Portuguese capital market

European Conference on Management Leadership and Governance

The corporate governance theme has been a subject of great debate due to the financial scandals of recent years. However, it is currently seen as a key factor for the success of organizations. This is because of the strong evolution that it has undergone over the years and the increase in financial market demands. Corporate governance is also seen as a crucial component in strengthening investor confidence. According to the literature, good corporate governance allows for the achievement of a degree of trust necessary for the proper functioning of a market. Currently, good corporate governance practices contribute to attracting investors, increasing stakeholder confidence, raising a company's reputation, and increasing business transparency among other benefits. The present study aims to analyse corporate governance disclosure in companies listed on Euronext Lisbon in 2020. To achieve this aim, we perform a content analysis of the corporate governance and annual reports as well ...

The importance of disclosure in corporate governance self-regulation across Europe: A review of the Winter Report and the EU Action Plan

International Journal of Disclosure and Governance, 2004

Although self-regulation has proven to be effective for the development of voluntary corporate-governance codes, the results of this study indicate that leading European companies are not yet too concerned about compliance with these codes. While self-regulation appears to be ineffective to change the disclosure practices of companies, the study concludes that factors relevant for choosing regulatory forms and the impact and risks involved with non-compliance of companies with voluntary codes have determined the Winter Report's emphasis on selfregulation.

The association between corporate governance and corporate disclosure: A critical review

Journal of Public Administration and Governance, 2013

This study provides a critical review of different techniques used in recent accounting literature to investigate the association between corporate governance and corporate disclosure. Therefore, the main purpose of this study is to help future researchers to identify examples and to select suitable practices or to develop their own ones. It also provides contest of current issues related to the relationship between corporate disclosure and corporate governance and identifies gaps in the current literature that future research may aim to cover. The study examines 34 articles published during the 2007-2013 period. The review of these articles concludes that most of these published studies examined the association between corporate disclosure and one or more of board of directors, ownership construction and audit firm. The current study suggests that researchers can also examine the association between internal audit quality as an internal governance and corporate disclosure. The study reveals that researchers used a disclosure index and content analysis to measure corporate disclosure. However, other techniques can be applied as management earning forecast and the number of analysts.

Intensive Board Monitoring, Investor Protection and Segment Disclosure Quality: Evidence from EU

Accounting in Europe, 2019

This study examined the association between intensive board monitoring (IBM) and segment disclosure quality (SDQ). It also investigated whether this association can be moderated by firm's home country investor protection (IP) level. Based on a panel of 271 non-financial European Union (EU) listed corporations covering the 2007-2012 period, this study estimated two multiple regression models including industry and year fixed effects. We found evidence that the segment disclosure quality is higher when a majority of outside directors serve on monitoring committees. We, also, found that the positive association between IBM and SDQ is more pronounced for firms in a weak IP environment and less pronounced for firms in a strong IP environment. Thus, we provided evidence in favor of a substitutive relationship between IBM and IP level with respect to their association with SDQ. Our findings are evidenced by several robustness tests.

Determinants of Structure of Corporate Governance Disclosure in Portugal

Purpose – This study analyses the determinants of the level of corporate governance disclosure (CGD) by Portuguese companies listed on Euronext Lisbon between 2005 and 2011. Design/methodology/approach – Using content analysis, we construct a corporate governance index for each firm based on the data extracted from the firm’s corporate governance and annual reports. An ordinal logistic regression model is used to examine the relationship between the level of CGD and its determinants. Findings – The empirical evidence suggests that foreign investor ownership, board size, board independence, external audit quality and degree of internationalization had a significant and positive influence on the corporate governance disclosure level, whereas ownership concentration, unitary leadership structure and debt had a significant and negative influence on corporate governance disclosure. No results were observed for board of director ownership and manager stock option compensation variables. Originality/value – This study extends the previous literature by examining corporate governance disclosure. Moreover, it extends prior work by analysing foreign investor ownership, manager stock option compensation and degree of internationalization as determinants of information disclosure. Finally, we believe that this study, conducted over a longer period of time, might give us stronger statistical evidence.

Corporate Governance Score and the Quality of Financial Disclosures: Evidence from the French Context

International Journal of Accounting and Financial Reporting

This research paper examines how corporate governance is related to the quality of financial disclosures for a sample of French listed firms during the period 2003-2009. We find that the level of financial reporting is positively influenced by corporate governance score. Managers and blockholders are more likely to disclose less information. These results are consistent with the belief that effective corporate governance is associated with higher financial disclosure quality while entrenched insiders do not improve this effect.

Governance disclosure quality and market valuation of firms in UK and Germany

International Journal of Finance & Economics, 2020

This study develops a "comply or explain" index which captures compliance and quality of explanations given for non-compliance with the corporate governance codes in UK and Germany. In particular, we explain, how compliance and quality of explanations provided in non-compliance disclosures, and various other internal corporate governance mechanisms, affect the market valuation of firms in the two countries. A dynamic generalised method of moments (GMM) estimator is employed as the research technique for our analysis, which enabled us to control for the potential effects of endogeneity in our models. The findings of our content analysis suggest that firms exhibit significant differences in compliance, board independence and ownership structure in both countries. The "comply or explain" index is positively associated with the market valuation of UK firms suggesting that compliance and quality governance disclosure are value relevant in the UK. Institutional blockholders' ownership is, however, negatively associated with the market value of firms, which raises questions about the monitoring role of institutional shareholders in both countries. We argue that both compliance and explanations given for non-compliance are equally important, as long as valid reasons and justifications for noncompliance are provided by the reporting companies. These findings thus imply that the "comply or explain" principle is working well and that UK and German companies could benefit from the flexibility offered by this principle. With respect to the role of board size, board independence, ownership structure, and institutional ownership of firms, this study offers policy implications.