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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
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
slide7
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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