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Corporate governance and the timeliness of audited financial statements

Corporate governance and the timeliness of audited financial statements The nature of corporate governance (CG) mechanisms in an entity may influence the timeliness of the audited annual report. The purpose of this paper is to argue that the “quality” of CG in a firm has a significant association with the time it takes the audited annual report and financial statements to be released.Design/methodology/approachUsing a set of 543 firm-year observations over the period 2007–2016, the authors examine whether a validated CG-Index is associated with audit report delay (ARD). The authors employ both granular as well as aggregated approaches to the analyses. In addition, the authors include control variables known to have an association with ARD in the panel data regressions.FindingsThe findings, which are robust for self-selection among other checks, reveal that financial expertise in the audit committee, board size, board meetings and independence in the board are associated with longer ARDs. Some CG attributes such as board diversity (i.e. women and different nationalities in the board) are associated with improved timeliness of the annual reports. The results also reveal that a longer tenure for independent directors in the board is associated with a shorter ARD. Overall, the authors find that the composite CG score has a positive influence on the timeliness of annual reports.Research limitations/implicationsThe study focuses on listed companies in one developing country. Additional studies focusing on other jurisdictions could yield more results.Practical implicationsThe study is useful in highlighting those CG characteristics firms should focus on toward the attainment of timely corporate reporting to aid in decision making by users.Originality/valueThe study is unique since it emphasizes the importance of focusing on an aggregate CG-Index, and the contribution of the CG-Index toward the timeliness of annual reports. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Accounting in Emerging Economies Emerald Publishing

Corporate governance and the timeliness of audited financial statements

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Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
2042-1168
DOI
10.1108/jaee-05-2018-0053
Publisher site
See Article on Publisher Site

Abstract

The nature of corporate governance (CG) mechanisms in an entity may influence the timeliness of the audited annual report. The purpose of this paper is to argue that the “quality” of CG in a firm has a significant association with the time it takes the audited annual report and financial statements to be released.Design/methodology/approachUsing a set of 543 firm-year observations over the period 2007–2016, the authors examine whether a validated CG-Index is associated with audit report delay (ARD). The authors employ both granular as well as aggregated approaches to the analyses. In addition, the authors include control variables known to have an association with ARD in the panel data regressions.FindingsThe findings, which are robust for self-selection among other checks, reveal that financial expertise in the audit committee, board size, board meetings and independence in the board are associated with longer ARDs. Some CG attributes such as board diversity (i.e. women and different nationalities in the board) are associated with improved timeliness of the annual reports. The results also reveal that a longer tenure for independent directors in the board is associated with a shorter ARD. Overall, the authors find that the composite CG score has a positive influence on the timeliness of annual reports.Research limitations/implicationsThe study focuses on listed companies in one developing country. Additional studies focusing on other jurisdictions could yield more results.Practical implicationsThe study is useful in highlighting those CG characteristics firms should focus on toward the attainment of timely corporate reporting to aid in decision making by users.Originality/valueThe study is unique since it emphasizes the importance of focusing on an aggregate CG-Index, and the contribution of the CG-Index toward the timeliness of annual reports.

Journal

Journal of Accounting in Emerging EconomiesEmerald Publishing

Published: Oct 15, 2019

Keywords: Corporate governance; Kenya; Annual report; Board diversity; Audit report delay

References