The association between corporate governance mechanisms and compliance with IFRS mandatory disclosure requirements: evidence from 12 African countries

2020 ◽  
Vol 20 (7) ◽  
pp. 1371-1392
Author(s):  
Yosra Mnif ◽  
Hela Borgi
Keyword(s):  
Corporate Governance ◽  
Financial Reporting ◽  
Audit Committee ◽  
Mandatory Disclosure ◽  
African Region ◽  
African Countries ◽  
Content Type ◽  
Disclosure Requirements ◽  
The Board Of Directors ◽  
Expected Benefits

Purpose The purpose of this study is to examine the association between two corporate governance (CG) mechanisms, namely, the board of directors and the audit committee (AC) and the compliance level with International Financial Reporting Standards (IFRS) mandatory disclosure requirements across 12 African countries. Design/methodology/approach This paper uses a self-constructed checklist of 140 items to measure the compliance with IFRS mandatory disclosure requirements (here after, COMP) of 202 non-financial listed firms during the 2012–2016 period. This paper applies panel regressions. Findings The findings reveal that CG mechanisms play an important role in enhancing compliance with IFRS in the African context. The results show that board independence, AC independence and the number of meetings held by the AC are positively associated with COMP. Regarding expertize, this paper find that AC industry expertise along with accounting financial expertise is associated with a higher level of COMP than accounting financial expertize alone. These results show the importance of the CG mechanisms to enforce African companies to fully comply with IFRS required disclosures. Practical implications The findings should give a signal to supervisory authorities that more effort is necessary to enforce IFRS across African countries if the introduction of IFRS is to bring the expected benefits to investors and other users. Hence, the lack of full compliance should remain a concern for regulators, professional accounting bodies and policymakers. Originality/value This study contributes to the literature by providing further insights that, within the African region an understudied context, extend current understanding of the association between CG mechanisms and COMP.

scholarly journals Does Governance Affect Compliance with IFRS 7?

2021 ◽  
Vol 14 (6) ◽  
pp. 239
Author(s):  
Amal Yamani ◽  
Khaled Hussainey ◽  
Khaldoon Albitar
Keyword(s):  
Corporate Governance ◽  
Voluntary Disclosure ◽  
Audit Committee ◽  
Banking Sector ◽  
Mandatory Disclosure ◽  
Disclosure Requirements ◽  
Corporate Governance Codes ◽  
Ifrs 7 ◽  
Enforcement Mechanisms ◽  
The Impact

Although there has been considerable research on the impact of corporate governance on corporate voluntary disclosure, empirical evidence on how governance affects compliance with mandatory disclosure requirements is limited. We contribute to governance and disclosure literature by examining the impact of corporate governance on compliance with IFRS 7 for the banking sector in Gulf Cooperation Council (GCC). We use a self-constructed disclosure index to measure compliance with IFRS 7. We use regression analyses to examine the impact of board characteristics, audit committee characteristics and ownership structure on compliance with IFRS 7. Using a sample of 335 bank-year observations for GCC listed banks over the period 2011–2017, we report evidence that corporate governance variables affect compliance with IFRS 7. However, the significance of these variables depends on the type of the regression model used. Our findings suggest that governance matters for mandatory disclosure requirements. So to improve the level of compliance, regulators, official authorities, and policymakers should intensify their efforts toward improving corporate governance codes, following up their implementation and enhancing the enforcement mechanisms.

Does audit committee substitute or complement other corporate governance mechanisms

2017 ◽  
Vol 32 (7) ◽  
pp. 658-681 ◽  
Author(s):  
Yousef Hassan ◽  
Rafiq Hijazi ◽  
Kamal Naser
Keyword(s):  
Corporate Governance ◽  
Ownership Structure ◽  
Audit Committee ◽  
Negative Relationship ◽  
Governance Mechanisms ◽  
Governance System ◽  
African Countries ◽  
Content Type ◽  
Board Characteristics ◽  
Corporate Governance Mechanisms

Purpose The purpose of this paper is to examine the relation between audit committee (AC) and a set of other corporate governance mechanisms in one of the emerging economies, United Arab of Emirates (UAE). In particular, the current study examines whether an effective AC can serve as a substitute or as a complement mechanism to board characteristics and ownership structure of Emirati listed non-financial companies. Design/methodology/approach Using substitution and complementary theories, a panel data from 48 nonfinancial companies listed on the UAE Stock Exchanges [Abu Dhabi Stock Exchange and Dubai Financial Market] during the period between 2011 and 2013 were used in the current study. A composite measure of four proxies has been used to measure the AC effectiveness, namely, AC size, independence, financial expertise and diligence. To test the hypotheses formulated for the study, a logistic regression model was used to identify the influence of a set of board characteristics and ownership structure variables on the effectiveness of the AC after controlling for firm size, auditor type, industry type and profitability. Findings While AC effectiveness appeared to be positively associated with board size and board independence, it is negatively associated with CEO duality. This points to a complementary governance relation. On the other hand, the negative relationship between AC effectiveness and each of institutional and government ownership suggests substitutive relations. Research limitations/implications The main shortcoming of the current study is that it examines the influence of a certain set of corporate governance factors on the effectiveness of AC. Other corporate governance mechanisms may, however, contribute to the effectiveness of AC. The findings of the study can be used by companies’ managements and regulators in the UAE to improve the corporate governance system. Originality/value To the best of researchers’ knowledge, this study provides the first evidence about the interaction among multiple governance mechanisms required by the code of corporate governance issued by the UAE Ministry of Economy in 2009. The current paper is expected to add to the limited AC literature in Middle East and North African countries in general and Arab World in particular.

Corporate governance failure at Ricoh India: rebuilding lost trust

2018 ◽  
Vol 8 (4) ◽  
pp. 1-20
Author(s):  
Sonu Goyal ◽  
Sanjay Dhamija
Keyword(s):  
Corporate Governance ◽  
Board Of Directors ◽  
Multinational Corporations ◽  
Audit Committee ◽  
Governance Structure ◽  
Special Focus ◽  
Corporate Governance Structure ◽  
Content Type ◽  
External Auditors ◽  
The Board Of Directors

Subject area The case “Corporate Governance Failure at Ricoh India: Rebuilding Lost Trust” discusses the series of events post disclosure of falsification of the accounts and violation of accounting principles, leading to a loss of INR 11.23bn for the company, eroding over 75 per cent of its market cap (Financial Express, 2016). The case provides an opportunity for students to understand the key components of corporate governance structure and consequences of poor corporate governance. The case highlights the responsibility of the board of directors, audit committee and external auditors and discusses the changes required in the corporate governance structure necessary to ensure that such incidents do not take place. The case also delves into the classic dilemma of degree of control that needs to be exercised by the parent over its subsidiaries and freedom of independence given to the subsidiary board, which is a constant challenge all multinationals face. Such a dilemma often leads to the challenge of creating appropriate corporate governance structures for numerous subsidiaries. Study level/applicability The case is intended for MBA courses on corporate governance, business ethics and also for the strategic management courses in the context of multinational corporations. The case can be used to develop an understanding of the essential of corporate governance with special focus on the role of the board of directors, audit committee and external auditors. The case highlights the consequences and cost of poor corporate governance. The case can also be used for highlighting governance challenges in the parent subsidiary relationship for multinational corporations. The case can be used for executive training purposes on corporate governance and leadership with special focus on business ethics. Case overview This case presents the challenges faced by the newly appointed Chairman Noboru Akahane of Ricoh India. In July 2016, Ricoh India, the Indian arm of Japanese firm Ricoh, admitted that the company’s accounts had been falsified and accounting principles violated, leading to a loss of INR 11.23 bn for the financial year 2016. The minority shareholders were agitating against the board of directors of Ricoh India and were also holding the parent company responsible for not safeguarding their interest. Over a period of 18 months, Ricoh India had been in the eye of a storm that involved delayed reporting of financials, auditor red flags regarding accounting irregularities, a forensic audit, suspension of top officials and a police complaint lodged by Ricoh India against its own officials. Akahane needed to ensure continuity of Ricoh India’s business and also act quickly and decisively to manage the crisis and ensure that these incidents did not recur in the future. Expected learning outcomes The case provides an opportunity for students to understand the key components of corporate governance structure and consequences of poor corporate governance. More specifically, the case addresses the following objectives: provide an overview of corporate governance structure; highlight the role of board of directors, audit committee and external auditors; appreciate the rationale behind mandatory auditor rotation; appreciate the consequences of poor corporate structure; explore the interrelationship between sustainability reporting and transparency in financial disclosures of a corporation; understand management and governance of subsidiaries by multinational companies; and understand the response to a crisis situation. Supplementary materials Teaching notes are available for educators only. Please contact your library to gain login details or email [email protected] to request teaching notes. Subject code CSS 11: Strategy.

Determinants of IFRS compliance in Africa: analysis of stakeholder attributes

2019 ◽  
Vol 27 (4) ◽  
pp. 573-599 ◽  
Author(s):  
Vincent Tawiah ◽  
Pran Boolaky
Keyword(s):  
Empirical Evidence ◽  
Financial Reporting ◽  
Audit Committee ◽  
Audit Committees ◽  
Corporate Boards ◽  
African Countries ◽  
Significant Positive Association ◽  
Content Type ◽  
High Compliance ◽  
Chartered Accountants

Purpose This paper aims to examine the drivers of companies’ compliance with International Financial Reporting Standards (IFRS) using the stakeholder salience theory. Design/methodology/approach The authors have used panel data from 205 companies to examine the IFRS compliance level across 13 African countries. This study has also established the relationship between stakeholders’ attributes and firms’ compliance with IFRS. Findings On IFRS compliance, the authors found that the average compliance score among the companies over the period was 73.09 per cent, with a minimum score of 62.86 per cent and a maximum of 85.61 per cent. The authors found a significant positive association between audit committee competence and compliance, as well as among chartered accountants on board. There is less compliance with the latest standards, such as IFRS 3, 7 and 13. Also, IAS 17, 19, 36 and 37 are problematic across the sample. The authors also found that compliance has been increasing over the years. Practical implications For companies, this study provides empirical evidence on the importance of having chartered accountants’ corporate boards, as well as competent audit committees involved in ensuring high compliance with IFRS. The findings also provide valuable information for professional accounting organizations on the role of their members (chartered accountants) in the effectiveness of IFRS compliance. Originality/value This study complements and updates prior studies on IFRS compliance with findings from Africa, a region that has been neglected in the literature. It provides empirical evidence on the importance of chartered accountants sitting on corporate boards in ensuring high compliance with IFRS.

Corporate governance and compliance with AAOIFI governance standards by Islamic banks

2020 ◽  
Vol 13 (5) ◽  
pp. 891-918
Author(s):  
Yosra Mnif ◽  
Marwa Tahari
Keyword(s):  
Corporate Governance ◽  
Financial Institutions ◽  
Audit Committee ◽  
Annual Reports ◽  
Islamic Banks ◽  
Content Type ◽  
Disclosure Requirements ◽  
Financial Expertise ◽  
Islamic Financial Institutions ◽  
Research Stage

Purpose This study aims to examine the effect of the main corporate governance characteristics on compliance with accounting and auditing organisation for Islamic financial institutions’ (AAOIFI) governance standards’ (GSs) disclosure requirements by Islamic banks (IB) that adopt AAOIFIs’ standards in Bahrain, Qatar, Jordan, Oman, Syria, Sudan, Palestine and Yemen. Design/methodology/approach The sample consists of 486 bank-year observations from 2009 to 2017. Findings The findings reveal that compliance with AAOIFIs’ GSs’ disclosure requirements is positively influenced by the audit committee (AC) independence, AC’s accounting and financial expertise and industry expertise, auditor industry specialisation, IB’s size and IB’s listing status. On the other hand, it is negatively influenced by the ownership concentration. Research limitations/implications This study has only examined compliance with AAOIFI’s GSs’ disclosure requirements and has focussed on one major sector of the Islamic financial institutions (which is IB). Practical implications The findings are useful for various groups of preparers and users of IBs’ annual reports such as academics and researchers, accountants, management of IBs and some organisations. Originality/value While the study of the AAOIFIs’ standards has grown contemporary with considerable contributions from scholars, however, the majority of these studies are descriptive in nature. Indeed, the existing literature that has explored the determinants of compliance with AAOIFI’s standards is in the early research stage. To the best of the knowledge, there is a paucity of empirical research testing this issue.

scholarly journals The extent of compliance with FRS 101 standard: Malaysian evidence

2017 ◽  
Vol 18 (1) ◽  
pp. 87-115 ◽  
Author(s):  
Azhar Abdul Rahman ◽  
Mohd Diah Hamdan
Keyword(s):  
Corporate Governance ◽  
Financial Reporting ◽  
Audit Committee ◽  
Content Type ◽  
Corporate Compliance ◽  
Financial Reporting Standards ◽  
Compliance Level ◽  
Using Data ◽  
Analysis Models ◽  
The Impact

Purpose The purpose of this paper is to investigate Malaysian companies’ compliance with mandatory accounting standards. Specifically, this study examines the efficacy of agency-related mechanisms on the degree of compliance with Financial Reporting Standards (FRS) 101, Presentation of Financial Statements. It so proceeds by focussing on corporate governance parameters (board characteristics and ownership structure) and other firm characteristics. Design/methodology/approach Using data drawn from a sample of 105 Malaysian companies listed on the ACE market in 2009, the authors employ multiple regression analysis models to establish whether selected corporate governance and company-specific characteristics (proxying for agency-related mechanisms) are related to the degree of disclosure compliance. Findings The results indicate that the overall disclosure compliance is high (92.5 per cent). Furthermore, only firm size is positively associated with the degree of compliance. The other variables, those consisting of board independence, audit committee independence, CEO duality, the extent of outside blockholders’ ownership and leverage, do not show any significant relationship with the degree of compliance. Research limitations/implications This study focusses on only one accounting standard (FRS 101) that is mandatory in Malaysia. FRS 101 is both structured and rigid, leaving no room for companies to conceal any particular information. The sample of Malaysian companies selected is restricted to those listed only on the ACE market. As such, the results cannot be generalised to every company in Malaysia. Practical implications These results have important implications for policy makers because they suggest that whilst agency-related mechanisms may motivate compliance with mandatory standards, full compliance may be unattainable without regulations. Originality/value This is the only study in Malaysia to investigate the impact of regulatory requirements on corporate compliance level by companies listed on the new ACE market, which was introduced by the Bursa Malaysia in August 2009. This study contributes to the literature by examining the effects of both company-specific characteristics (such as company size, company age, liquidity, etc.) and corporate governance parameters on the degree of corporate compliance with mandatory disclosure, simultaneously, in contrast with prior studies which have examined them in isolation.

Corporate governance and provisions under IAS 37

2017 ◽  
Vol 12 (1) ◽  
pp. 52-72 ◽  
Author(s):  
Ece Acar ◽  
Serdar Ozkan
Keyword(s):  
Developing Countries ◽  
Corporate Governance ◽  
Board Of Directors ◽  
Mandatory Disclosure ◽  
Full Disclosure ◽  
Content Type ◽  
Corporate Reporting ◽  
Concentrated Ownership ◽  
Disclosure Requirements ◽  
Institutional Owners

Purpose The purpose of this paper is to illustrate the extent of disclosure of provisions reported under IAS 37 provisions, contingent liabilities and contingent assets and explore the relation between provisions and corporate governance. Design/methodology/approach The current research utilizes a panel data analysis using a sample of 1,078 firm-year observations from Borsa Istanbul between the years 2005 and 2010. Findings Overall findings indicate that 62 percent of 1,078 firm-year observations recognize provisions, and among those, only 32 percent provide IAS 37’s full disclosure requirements. Firms that recognize provisions have larger board of directors and are more likely to be characterized with concentrated ownership and institutional owners. Also, firms with larger board of directors, greater independence and concentrated ownership have higher total provision/total debt ratios. Finally, firms that make full disclosure of provisions are more likely to have larger boards, higher ownership concentration and institutional owners and less likely to have CEO duality. Research limitations/implications As with all research, there are several limitations of this study. The study suffers from a lack of literature about provisions under IAS 37. The lack of literature directly focusing on provisions or IAS 37 appears to be one of the main limitations as well as one of the main contributions. Since this study focuses on one country, the comparison is not possible. Further research may contribute to literature by the use of other emerging economy’s capital market data. Moreover, further research can cover any other mandatory disclosure information specified in IASs/IFRSs and can provide comparative results about the compliance and strictness of the mandatory disclosure regime. Practical implications This study can be of interest to government, investors, business management, regulatory bodies, educators, researchers, accountants, auditors and scholars particularly in the field of accounting by seeking to make theoretical and practical contributions in the area of accounting disclosures and also serves as benchmark for future researches on corporate disclosures. Also this study provides significant insights to accounting regulators who set disclosure requirements. Originality/value Accurate corporate reporting is a necessary tool for the short- and long-term survival of the firms, hence the capital markets. Studying the level of disclosure will enable us to have additional insights about corporate reporting and will enhance the understanding of the nature of corporate reporting in developing countries. Disclosure practices by developing countries were empirically investigated in the past; however, the relation between provisions under IAS 37 and corporate governance has been unexplored in the literature. Thus, to the best of the authors’ knowledge, this is a pioneering research on provisions and corporate governance structure.

scholarly journals Audit committee diversity and corporate scandals: evidence from the UK

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Craig McLaughlin ◽  
Stephen Armstrong ◽  
Maha W. Moustafa ◽  
Ahmed A. Elamer
Keyword(s):  
Corporate Governance ◽  
Financial Reporting ◽  
Audit Committee ◽  
Corporate Fraud ◽  
Content Type ◽  
Corporate Scandals ◽  
Corporate Scandal ◽  
Binary Regression Analysis ◽  
And Gender ◽  
The Uk

Purpose This paper aims to empirically analyse specific characteristics of an audit committee that could be associated with the likelihood of corporate fraud/scandal/sanctions. Design/methodology/approach The sample includes all firms that were investigated by the Financial Reporting Council through the audit enforcement procedure from 2014 to 2019, and two matched no-scandal firms. It uses logistic binary regression analysis to examine the hypotheses. Findings Results based on the logit regression suggest that audit member tenure and audit committee meeting frequency both have positive associations to the likelihood of corporate scandal. Complementing this result, the authors find negative but insignificant relationships amongst audit committee female chair, audit committee female members percentage, audit committee qualified accountants members, audit committee attendance, number of shares held by audit committee members, audit committee remuneration, board tenure and the likelihood of corporate scandal across the sample. Research limitations/implications The results should help regulatory policymakers make decisions, which could be crucial to future corporate governance. Additionally, these results should be useful to investors who use corporate governance as criteria for investment decisions. Originality/value The authors extend, as well as contribute to the growing literature on the audit committee, and therefore, wider corporate governance literature and provide originality in that it is the first, to the knowledge, to consider two characteristics (i.e. remuneration and gender) in a UK context of corporate scandal. Also, the results imply that the structure and diversity of the audit committee affect corporate fraud/scandal/sanctions.

IFRS adoption, corporate governance and management earnings forecasts

2020 ◽  
Vol 18 (2) ◽  
pp. 325-342 ◽  
Author(s):  
Khawla Hlel ◽  
Ines Kahloul ◽  
Houssam Bouzgarrou
Keyword(s):  
Corporate Governance ◽  
Initial Public Offerings ◽  
Financial Reporting ◽  
Audit Committee ◽  
Earnings Forecasts ◽  
Forecast Errors ◽  
Management Forecasts ◽  
Management Earnings Forecasts ◽  
Content Type ◽  
Ifrs Adoption

Purpose This paper aims to examine whether International Financial Reporting Standards (IFRS) adoption and corporate governance attributes increase the management earnings forecasts’ accuracy disclosed in prospectuses for French Initial Public Offerings (IPOs). Design/methodology/approach The analysis is based on cross-sectional regression explaining the absolute forecast errors by using 45 French firms that made IPOs between 2005 and 2016 in two French financial markets: Euronext and Alternext. Findings In agreement with the agency theory and the signaling theory, the authors find that the IFRS adoption and the effective corporate governance, proxied by the board characteristics, increase the accuracy of management forecasts. As a result, this latter gives a credible signal in constructing and sustaining shareholders’ trust on the transparency and the reliability of such financial information. Research limitations/implications It is plausible that the limited size of the sample represents a limitation of this study. Another limitation is that no other corporate governance attributes such as board meeting frequency, audit committee measures and ownership structure are used. Practical implications Shareholders can take benefit from management forecasts accuracy to structure their investment portfolios efficiently to allocate their funds more effectively and mitigate the costs of adverse selection that they have to face. Furthermore, the authors expect the findings to be interesting to IPO firms, as this study highlights the efficiency of larger and independent boards in decreasing managerial discretion, increasing disclosure quality and supervising management. The results could encourage GAAP-adopters countries to move toward IFRS, as this research reinforces the role of IFRS in enhancing the quality of financial disclosure by offering the required information for shareholders. Originality/value This study is important because the potential investors should assess management earnings forecasts accuracy before they consider it when evaluating IPO firms. Also, this paper has some implications for the financial market. It is recommended that future investors pay more attention, when assessing the accuracy of management earnings forecasts, to the accounting regulations of the financial reporting along with the corporate governance mechanisms. Moreover, this study could incite French regulators to revise the AFEP-MEDEF code. Under this code, it could insist that larger and independent boards are more effective in performing their governing roles than smaller boards.

Corporate governance and compliance with IFRS 7

2020 ◽  
Vol 35 (3) ◽  
pp. 448-474 ◽  
Author(s):  
Yosra Mnif ◽  
Oumaima Znazen
Keyword(s):  
Corporate Governance ◽  
Financial Reporting ◽  
Audit Committee ◽  
Stock Exchange ◽  
Reporting Standard ◽  
International Financial Reporting Standard ◽  
Content Type ◽  
Ifrs 7 ◽  
The Impact ◽  
Mean Compliance

Purpose This paper aims to investigate the impact of the characteristics of two corporate governance mechanisms, namely, board of directors and audit committee (hereafter AC), on the level of compliance with International Financial Reporting Standard [hereafter International Financial Reporting Standards (IFRS)] 7 “Financial instruments: Disclosures” (hereafter FID). Design/methodology/approach Using a self-constructed checklist of 128 items, this research measures the compliance with IFRS 7 of 63 Canadian financial institutions listed on the Toronto Stock Exchange during a period of three years (2014-2016). Fixed effect panel regressions have been used to capture the individual effect present in authors’ data. Findings Empirical results show that the mean compliance level with IFRS 7 requirements is about 77 per cent and identify various areas of non-compliance. This level of compliance has a positive linkage with the board size and independence. Similarly, the AC independence and financial accounting expertise are shown to positively affect authors’ dependent variable. Nevertheless, CEO/chairman duality, AC size and meeting frequency are not significantly correlated with the level of compliance with IFRS 7. Originality/value This study expands prior compliance literature in the Canadian setting by examining the determinants of compliance with IFRS mandatory disclosures. Also, and to the best of the authors’ knowledge, this paper is among the first studies that have investigated the effect of corporate governance characteristics (hereafter CGC) on compliance with all IFRS 7 requirements in general.

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