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Do CEO Incentives Mediate the Relationship between Political Influences and Financial Reporting Quality?

Author

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  • Muhammad Sadiq
  • Shafi Mohamad
  • Wing Chong Garrett Kwong

Abstract

The purpose of this study is to examine whether CEO incentives mediate the relationship between political influences and financial reporting quality. This study particularly examines whether CEO incentives are the underlying mechanism through which politically influenced firms affect the incentives of those executives involved in preparing financial statements. In this study, politically influenced firms are identified as those in which politicians or their close relatives, and former or current civil/military bureaucrats are present on the board or in senior management. A sample of non-financial firms listed on the Pakistan Stock Exchange between 2009 and 2015 was taken. The results, which were tested for robustness, revealed that CEO incentives and political influences have a moderating effect on financial reporting quality. This study contributes to the field of corporate governance, integrating the agency and political economy theories, and provides policymakers insight into improving corporate governance in transitional economies. Further, this study contributes to the existing literature by including a new type of political connection, through civil/military bureaucrats.

Suggested Citation

  • Muhammad Sadiq & Shafi Mohamad & Wing Chong Garrett Kwong, 2019. "Do CEO Incentives Mediate the Relationship between Political Influences and Financial Reporting Quality?," International Journal of Asian Social Science, Asian Economic and Social Society, vol. 9(3), pages 276-284.
    • Handle: RePEc:asi:ijoass:v:9:y:2019:i:3:p:276-284:id:3117
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    Cited by:

    1. Ooi Chee Keong & Shafi Mohamad & Syed Ehsanullah, 2019. "International financial reporting standards and real earnings management," Asian Journal of Empirical Research, Asian Economic and Social Society, vol. 9(10), pages 281-292, October.
    2. Shafi Mohamad & Ooi Chee Keong & Syed Ehsanullah, 2019. "Accounting standards and the value relevance of financial statements," Asian Journal of Empirical Research, Asian Economic and Social Society, vol. 9(11), pages 337-345, November.

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