Corporate Governance Impact on Financial Value

What is it about?

The study looks at how internal corporate governance practices influence the importance of financial information in South African listed firms. It covers the period from 2002 to 2014, including stable, challenging, and post-financial crisis times, as well as key governance reforms. Using regression analysis, the research finds that aspects like the independence of the board and specific corporate governance structures impact the relevance of financial information. Specifically, earnings per share (EPS) is more influenced by corporate governance practices compared to net asset value per share. The study suggests that enforcing compliance with International Financial Reporting Standards (IFRS) and corporate governance may improve the value relevance of financial information in South Africa. This contributes to the understanding of the link between corporate governance and financial reporting.

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Photo by Adeolu Eletu on Unsplash

Photo by Adeolu Eletu on Unsplash

Why is it important?

This research is important because it investigates how internal corporate governance practices impact the relevance of financial information in South African listed firms. The findings highlight that specific aspects of corporate governance, such as board independence and structures, influence the value of financial information, particularly earnings per share (EPS). The study covers a significant period, including stable, challenging, and post-financial crisis times, as well as key governance reforms, providing a comprehensive understanding of these dynamics. The results suggest that enforcing compliance with International Financial Reporting Standards (IFRS) and corporate governance can enhance the value relevance of financial information. This research contributes to the broader discourse on the role of corporate governance in ensuring credible financial reporting and may inform regulators, policymakers, and the Johannesburg Stock Exchange on improving governance practices in South African firms.