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Corporate Governance Determinants of Financial Restatements: A Meta-Analysis

Author

Listed:
  • Ahsan Habib

    (School of Accountancy, Massey University, Private Bag 102904, Auckland, New Zealand)

  • Md. Borhan Uddin Bhuiyan

    (School of Accountancy, Massey University, Private Bag 102904, Auckland, New Zealand)

  • Julia Wu

    (Accounting and Information Systems, College of Business and Law, University of Canterbury, Private Bag 4800, Christchurch 8140, New Zealand)

Abstract

This paper conducts a meta-analysis of 182 published archival accounting and auditing studies on the corporate governance determinants of financial restatements. We aim to provide a focused and systematic examination of various internal and external corporate governance factors that may predict financial restatements. We do so by aggregating results statistically across individual studies and correcting statistical artifacts, thereby we provide findings that are much more precise than those of narrative reviews. We categorize the chosen governance variables into (a) audit firm and audit engagement characteristics; (b) gender, board attributes, and audit committee attributes; (c) CEO related attributes; (d) ownership structure variables; and (e) external corporate governance variables, and thus we generate a total of 37 separate corporate governance variables. Our results reveal that the governance mechanisms of Big N auditor choice, types, and timeliness of audit opinions and board independence are significantly and negatively associated with the occurrence of financial restatements. However, economic bonding between auditors and their clients, insider ownership, and firm complexity all increase the likelihood of restatements significantly. We hope that our findings will make a meaningful contribution to the literature on financial restatements and corporate governance by providing insights for regulators on the governance mechanisms that may require further scrutiny in combating the occurrence of financial restatements.

Suggested Citation

  • Ahsan Habib & Md. Borhan Uddin Bhuiyan & Julia Wu, 2021. "Corporate Governance Determinants of Financial Restatements: A Meta-Analysis," The International Journal of Accounting (TIJA), World Scientific Publishing Co. Pte. Ltd., vol. 56(01), pages 1-71, March.
    • Handle: RePEc:wsi:tijaxx:v:56:y:2021:i:01:n:s1094406021500025
    DOI: 10.1142/S1094406021500025
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    Citations

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    Cited by:

    1. Lu, Yun & Ntim, Collins G. & Zhang, Qingjing & Li, Pingli, 2022. "Board of directors’ attributes and corporate outcomes: A systematic literature review and future research agenda," International Review of Financial Analysis, Elsevier, vol. 84(C).
    2. 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.
    3. Patrick Velte, 2023. "The impact of external auditors on firms’ financial restatements: a review of archival studies and implications for future research," Management Review Quarterly, Springer, vol. 73(3), pages 959-985, September.

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