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Corporate governance and the value‐relevance of accounting information

Author

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  • Ahsan Habib
  • Istiaq Azim

Abstract

Purpose - This paper seeks to examine the relationship between corporate governance and the value‐relevance of accounting information in Australia. Design/methodology/approach - This paper uses board, audit committee and external audit related variables to proxy for corporate governance. Value‐relevance is measured by the adjustedR2derived from a regression of stock price on earnings and equity book values following Ohlosn's accounting‐based valuation framework. Findings - Regression results show that firms with strong governance structure exhibit higher value‐relevance of accounting information. Results further show that firm‐specific economic variables are important determinants of the value‐relevance of accounting information. Research limitations/implications - Significant regulatory reforms regarding corporate governance around the world give an impression that regulators believe that governance plays a key role in ensuring, among others, credible financial reporting. This paper provides support for such a view in Australian context. Originality/value - This paper uses the relationship between accounting numbers and share price as the measure of accounting information quality and also considers the impact of ASX Corporate Governance Best Practice Code on the changes in the value‐relevance of accounting information.

Suggested Citation

  • Ahsan Habib & Istiaq Azim, 2008. "Corporate governance and the value‐relevance of accounting information," Accounting Research Journal, Emerald Group Publishing Limited, vol. 21(2), pages 167-194, September.
    • Handle: RePEc:eme:arjpps:v:21:y:2008:i:2:p:167-194
    DOI: 10.1108/10309610810905944
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    Citations

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    Cited by:

    1. Yuni Pristiwati Noer Widianingsih & Doddy Setiawan, 2023. "The tenure of directors and value relevance of accounting information," SN Business & Economics, Springer, vol. 3(6), pages 1-18, June.
    2. Alessandro Mechelli & Riccardo Cimini, 2021. "The effect of corporate governance and investor protection environments on the value relevance of new accounting standards: the case of IFRS 9 and IAS 39," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 25(4), pages 1241-1266, December.
    3. Carmen- Alexandra BALTARIU, 2015. "The Current State Of Knowledge In The Value Relevance Research Field," SEA - Practical Application of Science, Romanian Foundation for Business Intelligence, Editorial Department, issue 7, pages 13-20, April.
    4. Waqas Bin Khidmat & Man Wang & Sadia Awan, 2018. "Corporate governance, earnings management and the value-relevance of accounting information: Evidence from Pakistan," International Journal of Financial Engineering (IJFE), World Scientific Publishing Co. Pte. Ltd., vol. 5(03), pages 1-31, September.
    5. Mihai CARP, 2016. "Empirical Study regarding the Influence of the Quality of Financial Information on the Value of Listed Companies," The Audit Financiar journal, Chamber of Financial Auditors of Romania, vol. 14(133), pages 1-78, January.
    6. Petros Kalantonis & Andreas Errikos Delegkos & Emmanouela Sotirchou & Aristidis Papagrigoriou, 2022. "Modern business development and financial reporting: exploring the effect of corporate governance on the value relevance of accounting information—evidence from the Greek listed firms," Operational Research, Springer, vol. 22(3), pages 2879-2897, July.
    7. Jimi Siekkinen, 2017. "Board characteristics and the value relevance of fair values," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 21(2), pages 435-471, June.
    8. Moumen, Néjia & Ben Othman, Hakim & Hussainey, Khaled, 2016. "Board structure and the informativeness of risk disclosure: Evidence from MENA emerging markets," Advances in accounting, Elsevier, vol. 35(C), pages 82-97.
    9. Bakar, Intan Suryani Abu & Khan, Arifur & Mather, Paul & Tanewski, George, 2018. "Corporate boards and performance pricing in private debt contracts," Pacific-Basin Finance Journal, Elsevier, vol. 50(C), pages 144-162.
    10. Puja Aggarwal & Sonia Garg, 2022. "Impact of Mergers and Acquisitions on Accounting-based Performance of Acquiring Firms in India," Global Business Review, International Management Institute, vol. 23(1), pages 218-236, February.
    11. Redhwan Ahmed Ali Al-Dhamari & Sitraselvi Chandren, 2018. "Audit Partners Gender, Auditor Quality and Clients Value Relevance," Global Business Review, International Management Institute, vol. 19(4), pages 952-967, August.

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