scholarly journals The Effect of Internal Control Disclosure on Financial Information Quality and Market Performance distinguished by the Corporate Governance Index

2018 ◽  
Vol 8 (1) ◽  
pp. 241
Author(s):  
Weli ◽  
Julianti Sjarief
Keyword(s):  
Corporate Governance ◽  
Internal Control ◽  
Information Disclosure ◽  
Information Quality ◽  
Market Performance ◽  
Financial Information ◽  
Annual Reports ◽  
Corporate Disclosure ◽  
Public Corporations ◽  
Governance Index

Corporate disclosure practice of internal control in Indonesia remains non-mandatory and limited in nature. This study was conducted to analyze the level of internal control disclosure in the annual reports of Indonesian public corporations and identify its consequences on the firm’s market performance and financial information quality, which was differentiated by corporate governance index. This index refers to the Corporate Governance Perception Index released by the Indonesian Institute for Corporate Governance in 2014 and 2015. Based on the conducted content analysis, it can be concluded that the disclosure of internal control by public corporations in Indonesia is still at an intermediate level. The influence of extensive internal control information disclosure on market performance is strengthened by the accounting information quality. And the influence of the relationship between extensive disclosure and firm performance is different between CGPI-indexed companies and those which are unindexed by CGPI. The findings of this research contribute to future researches related to internal control disclosure. Limitations and suggestions can be found at the end of this study.

Board structure changes after accounting fraud: the case of Schneider Electric

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Benedicte Millet-Reyes ◽  
Nancy Uddin
Keyword(s):  
Corporate Governance ◽  
Internal Control ◽  
Multinational Corporation ◽  
Business Case ◽  
Annual Reports ◽  
Board Structure ◽  
Control Mechanisms ◽  
Accounting Fraud ◽  
Content Type ◽  
The Impact

Theoretical basis The impact of corporate governance on internal controls and quality of financial disclosures. Research methodology Analysis of a real financial fraud event for a non-US multinational corporation. The case relies on accessing and analyzing annual reports for the firm, both before and after the fraud. Additional information on industry governance characteristics are provided in the case itself so that students can compare the firm to the industry. Case overview/synopsis This business case is centered on the analysis of Schneider Electric, a French multinational corporation, which had to restate their financial statements in 2011 because of accounting fraud. Following this event, Schneider undertook major changes in their board structure to improve internal control mechanisms. This pedagogical business case familiarizes students with international differences in ownership and board structure and emphasizes potential corporate governance changes after financial statement fraud. Complexity academic level Managerial finance, corporate finance, international finance, auditing. This case is more appropriate for upper-level undergraduate and graduate courses.

scholarly journals Impact of corporate governance index on firm performance: evidence from Pakistani manufacturing sector

2015 ◽  
Vol 4 (3) ◽  
pp. 163-174 ◽  
Author(s):  
Faisal Javaid
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Capital Investment ◽  
Random Effect ◽  
Annual Reports ◽  
Governance Mechanism ◽  
Inconsistent Result ◽  
Governance Index ◽  
Corporate Governance Mechanism ◽  
The Relationship

Corporate governance is considered to have significant impact on the growth and development perspective of an economy. Sound corporate governance practices leads the economy towards the achievement of higher performance, provide sources for capital investment by increasing the creditability of shareholders. The purpose of this study is to empirically investigate the relationship of corporate governance and firm performance in terms of accounting as well as market performance i.e.to be measured by Return on asset, Return on equity and Tobin’s Q. The theoretical base to conduct the study is the demand of separation of ownership and control characterize as agency theory. The previous studies have yielded inconsistent result. To achieve the purpose 58 textile sector companies were selected listed in the Karachi stock exchange and data was taken from annual reports of the companies for the period of 2009 to 2013. Descriptive statistics, correlation analysis and regression estimation using pooled, fixed effect, random effect and Hausman specification test were carried out after developing a composite index based on 21 proxies. The result entails that corporate governance index (CGI) and firm performance has positive and significant association but the relationship for each specific index is dependent upon the measure of firm performance. The result also shows that companies having strong corporate governance mechanism has greater chances to acquire finance. The implication of study demands that the reform effort should be directed towards the improvement in internal corporate governance mechanism and regulatory framework for the governance system.

Relation between internet financial information disclosure and internal control in Spanish local governments

2019 ◽  
Vol 71 (2) ◽  
pp. 176-194 ◽  
Author(s):  
María del Rocío Moreno-Enguix ◽  
Ester Gras-Gil ◽  
Joaquín Henández-Fernández
Keyword(s):  
Internal Control ◽  
Local Governments ◽  
Information Disclosure ◽  
Financial Information ◽  
Public Governance ◽  
Content Type ◽  
Financial Variables ◽  
New Public ◽  
Provision Of Services ◽  
The Impact

Purpose The application of new public governance by many countries has led to the creation of new management systems in public administration and the development of an effective accounting structure with efficient internal control to guarantee a proper provision of services that meet citizens’ requirements. The purpose of this paper is to focus on Spanish local government with the intention of determining the impact of the internal control structure on the disclosure of financial information on the internet. Design/methodology/approach The empirical analysis used combines a descriptive aspect with an explanatory one and seeks to answer the question of whether the internal control system (ICS) influences the disclosure of financial information on the websites of Spanish LGs. The authors use a multivariate model that allows us to verify the predictive capability of the previously defined explanatory variable, internal control, in 1,806 local governments. To test the hypotheses, the authors use two different models. Findings The authors consider the existence and quality of the financial information disclosure in relation to ICSs, and a series of financial and non-financial variables. The authors conclude that the structure of the ICS influences financial information disclosure and its quality. Also, the socio-political variable gives a better explanation of financial information disclosure than the financial variable. Originality/value This research is novel to determine whether the development of ICSs in Spanish municipalities has favored and increased the disclosure of financial information financial through the municipalities’ website transparency portal. These findings will contribute to increase the importance of internal control in the management of public entities.

scholarly journals Internal Control Weakness: A Literature Review

2019 ◽  
Vol 8 (2) ◽  
pp. 121
Author(s):  
Yu Lu ◽  
Diandian Ma
Keyword(s):  
Corporate Governance ◽  
Financial Reporting ◽  
Insider Trading ◽  
Internal Control ◽  
Capital Market ◽  
Information Quality ◽  
Empirical Literature ◽  
Affecting Factors ◽  
Debt Contracting

The purpose of this essay is to review empirical literature on internal control weakness over the past seven years. I use an analysis framework consisting of determinants (corporate governance and other affecting factors) and economic consequences (accounting information quality, market reaction, cost of equity, debt contracting) of weakness disclosure and its remediation. Basic findings of prior studies agree that corporate governance and firm characteristics influence the presence of control problems and their remediation. In turn, the effectiveness of internal control impacts the quality of financing reporting, auditor reaction (auditing fees and audit delays), insider trading and leads to capital market consequences (the weakness disclosures affect debt contracting). More internal control studies combine with capital market and provide evidence that SOX are not always effective. Overall, these findings contribute to profession by suggesting that the disclosures of internal control deficiencies generally convey incremental information on the quality of financial reporting to investors. This review integrates and assesses current internal control weakness research and offers some suggestions for future study.

Corporate governance, accruals quality and stock returns: evidence from the UK

2014 ◽  
Vol 14 (1) ◽  
pp. 32-44 ◽  
Author(s):  
Sulaiman Mouselli ◽  
Riad Abdulraouf ◽  
Aziz Jaafar
Keyword(s):  
Corporate Governance ◽  
Stock Returns ◽  
Information Quality ◽  
Financial Information ◽  
Governance Mechanism ◽  
Content Type ◽  
Listed Firms ◽  
Accruals Quality ◽  
Market Factor

Purpose – This paper aims to identify the most significant governance provision in enhancing the financial information quality of UK listed firms. In addition, it investigates the influence of this governance provision in explaining stock returns of 20 UK industry portfolios. Design/methodology/approach – To identify the main governance provision in enhancing the accruals quality, the paper runs regressions of accruals quality variable on the total governance variable, on the governance provisions individually, and on the governance provisions taken together with and without integrating control variables. Next, Asset Pricing tests are employed to examine the capacity of the audit provision, as proved the most influential governance provision on accruals quality, to explain stock returns. The quantitative approach used in the paper enables to investigate the relationship between corporate governance, accruals quality, and stock returns. Findings – Results indicate that audit provision is the most important governance mechanism affecting accruals quality. In addition, this mechanism is comparable with the book-to-market factor in explaining the time-series variation in portfolios returns. Furthermore, the introduction of the Audit factor to Fama-French model reduces the significance of the size factor and the book-to-market factor in explaining stock returns. This suggests that size and the book-to-market factors contain information related to the audit provision. Research limitations/implications – The findings of the paper carry implications for investors as they do not need to equally weight all corporate governance provisions in their resource allocation decisions. The significant influence of audit provision on accruals quality needs to be taken into consideration when investment decisions are made. Audit factor is important in predicting future returns. It is also found to be as good as book-to-market factor in explaining portfolios returns. Also, the findings have many implications for regulatory bodies in their efforts to enhance financial information quality. Establishing roles for best governance in reducing information risk should focus, among other things, on the significant elements of corporate governance in improving accruals quality. The main limitation of the study is the restricted variation in the Audit governance factor which comes from the source of corporate governance data, i.e. CGQ. Firms in the sample do not exhibit diversified levels of Audit scores. Accordingly, when constructing audit risk factor it was found that firms could only be split into two portfolios according to their Audit scores instead of five. Originality/value – This study identifies audit provision as the most significant governance mechanism in enhancing the financial information quality of UK listed firms. In addition, a factor representing audit provision is constructed to investigate the influence of this provision on stock returns. To the authors' knowledge, this is the first study that examines the capacity of the audit provision to explain stock returns in an asset pricing framework.

scholarly journals The Effect of Corporate Governance on Tax Avoidance: Evidence from Indonesia

2020 ◽  
Vol 2 (4) ◽  
pp. 66-85
Author(s):  
Feren Frisca Tania ◽  
. Mukhlasin
Keyword(s):  
Corporate Governance ◽  
Internal Control ◽  
Audit Committee ◽  
Stock Exchange ◽  
Tax Avoidance ◽  
Secondary Data ◽  
Audit Committees ◽  
Annual Reports ◽  
Manufacturing Companies ◽  
Negative Effect

This study aims to analyze the effect of the effectiveness of internal control, independent commissioners, the expertise of the board of commissioners, the number of audit committees, and the expertise of the audit committee on tax avoidance in manufacturing companies listed in Indonesia Stock Exchange period 2016-2018. This research is expected to be a material consideration for companies in making decisions related to taxation. The deductive approach used in this study by developing hypotheses based on relevant theories and findings of previous studies. Agency theory is used to see the effect of corporate governance on tax avoidance. The data collection method uses secondary data from the company's financial statements and annual reports according to specific criteria. Data analysis was performed by descriptive statistics and multiple linear regression. The results of the regression analysis prove that effectiveness of internal control and number of audit committees had a positive effect which means higher effectiveness of internal control and number of audit committees cause more tax avoidance, conversely independent commissioners and expertise of the board of commissioners had a negative effect which shows greater independent commissioners and expertise of the board of commissioners cause less tax avoidance. Another result claim that the expertise of the audit committee did not affect on tax avoidance. In contrast to previous studies, this study is more varied by combining several independent variables. JEL Codes: G34, H26.

scholarly journals Corporate Governance Mechanisms and Voluntary Disclosure

2020 ◽  
Vol 11 (2) ◽  
pp. 82
Author(s):  
Erwin Saraswati ◽  
Alfizah Azzahra ◽  
Ananda Sagitaputri
Keyword(s):  
Corporate Governance ◽  
Voluntary Disclosure ◽  
Family Firms ◽  
Stock Exchange ◽  
Annual Reports ◽  
Corporate Disclosure ◽  
Governance Mechanisms ◽  
Voluntary Disclosures ◽  
Corporate Governance Mechanisms ◽  
New Evidence

Corporate disclosure and corporate governance are two inseparable instruments of investor protection. This research sought to find evidence on how corporate governance mechanisms affect the extent of voluntary disclosures. Voluntary disclosures were measured using content analysis on published annual reports. The sample of this research consisted of 81 firm-year observations from 27 firms of consumer goods sector listed on Indonesian Stock Exchange from 2016 to 2018. Using multiple regression method, the result has shown that board size and board independence increase voluntary disclosures, indicating that the commissioners have effectively represented the interests of shareholders by monitoring and encouraging the management to increase disclosure. This research provided new evidence that family ownership increases voluntary disclosure, suggesting that family firms are more concerned by the costs of non-disclosure. Meanwhile, institutional ownership does not significantly affect voluntary disclosure. 

scholarly journals Corporate Governance in Russian electric power industry in terms of consumer requirements to its funding sources

2018 ◽  
Vol 58 ◽  
pp. 02004
Author(s):  
G.I. Sheveleva
Keyword(s):  
Power Generation ◽  
Corporate Governance ◽  
Information Disclosure ◽  
Good Governance ◽  
Electric Power Industry ◽  
Transparency International ◽  
Governance Index ◽  
Governance Quality ◽  
Corporate Governance Quality ◽  
International Good

The paper highlights a strong interest of energy consumers in attracting investment in the development of Russian power generation companies. The importance of corporate governance for enhancing the investment attractiveness of these companies is emphasized. An in-depth evaluation of their current corporate practices was carried out within the framework of the existing ownership structure. The study identified the indicators of corporate governance quality for the benefit of modern investors that are the least observed by the overwhelming majority of power companies. The indicators were obtained on the basis of whether or not the companies satisfy the criteria of the new Russian Corporate Governance Code, and the criteria of the methodologies of Standard & Poor’s, Spencer Stuart and Transparency International. The study shows a slight increase in the transparency of the companies in the post-reform period and compares it with the information disclosure by the major corporations of Great Britain, the USA and Europe. The study shows high correlation of the approach and composition of the identified indicators of the corporate governance quality for Russian power generation companies with the 2017 Russian Corporate Governance Index. This Index is based on the international Good Governance Index methodology adapted to the Russian conditions.

scholarly journals Corporate Governance Characteristics of Private SMEs’ Annual Report Submission Violations

2020 ◽  
Vol 13 (10) ◽  
pp. 230
Author(s):  
Oliver Lukason ◽  
María-del-Mar Camacho-Miñano
Keyword(s):  
Corporate Governance ◽  
Annual Report ◽  
Financial Information ◽  
Annual Reports ◽  
Board Members ◽  
Firm Age ◽  
Unethical Behaviour ◽  
Independent Variables ◽  
Submission Deadline ◽  
Business Ties

Managers are, by law, responsible for the timely disclosure of financial information through annual reports, but despite that, it is usual that they are engaged in the unethical behaviour of not meeting the submission deadlines set in law. This paper sheds light on the afore-given issue by aiming to find out how corporate governance characteristics are associated with annual report deadline violations in private micro-, small- and medium-sized enterprises (SMEs). We use the population of SMEs from Estonia, in total 77,212 unique firms, in logistic regression analysis with the delay of presenting an annual report over the legal deadline as the dependent and relevant corporate governance characteristics as the independent variables. Our results indicate that the presence of woman on the board, higher manager’s age, longer tenure and a larger proportion of stock owned by board members lead to less likely violation of the annual report submission deadline, but in turn, the presence of more business ties and existence of a majority owner behave in the opposite way. The likelihood of violation does not depend on board size. We also check the robustness of the obtained results with respect to the severity of delay, firm age and size, which all indicate a varying importance of the explanatory corporate governance characteristics.

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