Topic 2 debriefing
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TOPIC 2 DEBRIEFING. LEARNING OUTCOMES: CAN EXPLAIN WHAT CORPORATE GOVERNANCE IS CAN DISCUSS CODE OF CORPORATE GOVERNANCE BEST PRACTICE CAN EXPLAIN HOW GOOD GOVERNANCE IS RELATED TO FINANCIAL REPORTING. Empirical findings.

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TOPIC 2 DEBRIEFING

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Topic 2 debriefing

TOPIC 2 DEBRIEFING

  • LEARNING OUTCOMES:

  • CAN EXPLAIN WHAT CORPORATE GOVERNANCE IS

  • CAN DISCUSS CODE OF CORPORATE GOVERNANCE BEST PRACTICE

  • CAN EXPLAIN HOW GOOD GOVERNANCE IS RELATED TO FINANCIAL REPORTING


Empirical findings

Empirical findings

  • Are more independent boards effective? Beasley (1966) less fraudulent reporting

  • Share price reaction more positive to independent boards


Mangena and pike 2005

MANGENA AND PIKE 2005

  • AUDIT COMMITTEES AND LEVEL OF DISCLOSURE IN INTERIM REPORTS

  • INDEPENDENCE (-),

  • FINANCIAL EXPERTISE (+)

  • SIZE NS

  • CREDIBILITY OF FINANCIAL REPORTS AND CG CONTROL MECHANISMS


Sarbanes oxley act sox

SARBANES OXLEY ACT (SOX)

  • REQUIRES HIGHER GOVERNANCE FROM DIRECTORS,EMPHASIZES BOARD INDEPENDENCE


What is corporate governance

WHAT IS CORPORATE GOVERNANCE

  • A PROCESS BY WHICH OWNERS AND CREDITORS OF AN ORGANIZATION EXERT CONTROL AND REQUIRE ACCOUNTABILITY FOR THE RESOURCES ENTRUSTED TO THE ORGANIZATION. THE OWNERS ELECT A BOD TO PROVIDE OVERSIGHT OF THE ORGANIZATION’S ACTIVITIES


Non executive directors

NON-EXECUTIVE DIRECTORS

  • MONITOR MANAGERIAL PERFORMANCE

  • ENSURE QUALITY REPORTING

  • BOARD DOMINATED BY INSIDERS WEAKER MONITORING

  • HOW MANY TYPES


Topic 2 debriefing

CG

  • MANY PARTIES INVOLVED

  • GOVERNANCE STARTS WITH OWNERS WHO ELECT BOD

  • BOD EMPOWER MANAGEMENT

  • MANAGEMENT ENGAGES OPERATING MANAGEMENT.

  • FLOW OF ACCOUNTABILITY UPWARDS


Parties in cg

PARTIES IN CG

  • SHAREHOLDERS

  • BOD

  • AUDIT COMMITTEES

  • MANAGEMENT

  • SELF REGULATORY BODIES

  • OTHER REGULATORY AGENCIES

  • AUDITORS – EXTERNAL AND INTERNAL


Responsibilities

RESPONSIBILITIES

  • EACH GROUP

  • EACH FAILED


Code of cg

CODE OF CG

  • PRINCIPLES AND BEST PRACTICE

  • PN 9 COMPLY OR EXPLAIN WHY NOT


Financial reporting

FINANCIAL REPORTING

  • AS A BASIS FOR RESOURCE ALLOCATION OF SOCIETIES

  • RESOURCE ALLOCATION MADE BY INVESTORS

  • EARNINGS FIGURES ARE RELIABLE


Who are concernced with cg

WHO ARE CONCERNCED WITH CG

  • REGULATORS - CMMP

  • PN 9

  • AUDITORS - AUDIT COMMITTEE

  • MICG

  • INVESTORS –FOREIGN, INSTITUTIONAL


Governance quality

GOVERNANCE QUALITY

  • CLSA

  • DEMINOR

  • GOMPER AND ISHI


Cg and accounting

CG AND ACCOUNTING

  • FRAUDULENT REPORTING

  • MORE TRANSPARENT

  • MORE TIMELY

  • GREATER COMPLIANCE

  • LESS EARNINGS MANAGEMENT

  • LESS CREATIVE ACCOUNTING

  • MORE CORPORATE RESPONSIBILITY

  • MORE VOLUNTARY DISCLOSURE


Cg and accounting1

CG AND ACCOUNTING

  • LESS FORECAST ERRORS

  • MORE APPRORIATE CHOICE OF ACCOUNTING POLICIES

  • BETTER INTERNAL CONTROL


Why better quality financial reporting

WHY BETTER QUALITY FINANCIAL REPORTING?

  • MORE EXPERT AUDIT COMMITTEE

  • MORE INDEPENDENT DIRECTORS

  • FORCE OF LAW INTERNATIONAL ACCOUNTING STANDARDS

  • WATCHDOG BODY

  • CODE OF ETHICS FOR DIRECTORS


Corporate governance and performance

CORPORATE GOVERNANCE AND PERFORMANCE

  • PROCESS, STRUCTURE, OUTCOMES

  • BETTER CG BETTER OUTCOMES?

  • IMPROVED CG IMPROVED QUALITY OF FINANCIAL REPORTING

  • DO COMPANIES SHORT LISTED FOR NACRA AWARD HAVE BETTER GOVERNANCE COMPARED TO THOSE NOT SHORT LISTED?


Lamber and sponem 2005

LAMBER AND SPONEM 2005

  • BLAME ADOPTION OF UK CG IDEAS FOR INCREASED PROFIT MANIPULATION IN FRANCE


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