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External Corporate Governance and Misreporting

Author

Listed:
  • William R. Baber
  • Sok†Hyon Kang
  • Lihong Liang
  • Zinan Zhu

Abstract

This study investigates how external corporate governance provisions, specifically statutory and corporate charter provisions that limit direct shareholder participation in the governance process, affect the likelihood of an accounting restatement. The analysis indicates that strong external governance (fewer restrictions on shareholder participation) is associated with a relatively low incidence of accounting restatements. The effect of external governance is incremental to that of internal governance, which is considered as provisions that foster effective board oversight of management. Such evidence supports the premise that shareholder participation improves financial reporting quality.

Suggested Citation

  • William R. Baber & Sok†Hyon Kang & Lihong Liang & Zinan Zhu, 2015. "External Corporate Governance and Misreporting," Contemporary Accounting Research, John Wiley & Sons, vol. 32(4), pages 1413-1442, December.
    • Handle: RePEc:wly:coacre:v:32:y:2015:i:4:p:1413-1442
    DOI: 10.1111/1911-3846.12137
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    Cited by:

    1. Patrick Velte, 2023. "The link between corporate governance and corporate financial misconduct. A review of archival studies and implications for future research," Management Review Quarterly, Springer, vol. 73(1), pages 353-411, February.
    2. Shi, Lisi & Ho, Kung-Cheng & Liu, Ming-Yu, 2023. "Does societal trust make managers more trustworthy?," International Review of Financial Analysis, Elsevier, vol. 86(C).

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