Relationship between Corporate Governance and Earnings Quality: Case Study of Listed Companies in the Thailand Stock Exchange

A good earnings quality is very significant as it leads to the effective disclosure and accordingly good corporate governance. This research attempts to utilize the association of newly-created Corporate Governance which measures from the Corporate Governance Scores of the Thai Institute of Directors (IOD) in the Stock Exchange of Thailand (SET) in the year 2011 as independent variable, which the higher IOD score usually reflext the higher level of Corporate Governance and earnings quality as the dependent variable which used the variance and risk, which measured using standard deviation. Standard deviation is a standard measure of investment risk. This IOD’s score compares almost all listed firms with the criteria established in the principles of corporate governance. The chi-square was used to test this relationship at 95% confidence. Results of analysis highlights that the standard deviation of firms listed in the SET for year 2011 is have the associated with IOD Score. In summary, the high Corporate Governance measured by IOD score shows earnings quality. In this study means that the firm which has a high IOD score, which means high corporate governance will have earnings quality which measure by using standard deviation. However, the results of this study shows the relationship between the two variables. The reason behinds this result may due to the fact that eventhough there are many ways to measure quality earnings, for our study, we use only standard deviations to measure earnings quality.