Investigating the Effect of Corporate Governance Mechanisms on the Quality of Accounting Profit

Forough Heirany (), Alireza Naser Sadrabadi () and Fateme Fallah Mehrjordi ()
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Forough Heirany: Islamic Azad University
Alireza Naser Sadrabadi: Yazd University
Fateme Fallah Mehrjordi: Islamic Azad University

International Journal of Academic Research in Accounting, Finance and Management Sciences, 2013, vol. 3, issue 3, 315-328

Abstract: Considerable attention given to the issues of corporate governance in recent years shows that the when corporate governance mechanisms are strong, managers find less time to deceive and this consequently increases the quality and reliability of their financial reporting. This research ultimately helps investors to maintain and increase their trust in the capital markets. The current investigation is aimed at investigating the effect of corporate governance mechanisms on the quality of financial reporting through the connection between companies operating ratios and accounting income quali- ty. Centralization of power, the ownership percentage of institutional shareholders and board inde- pendence are among the corporate governance mechanisms which have been taken into account in this study. Earnings quality was measured in two ways. Sixty companies were selected as the sample among listed companies in Tehran Stock Exchange during 2006 to 2010. Multiple regressions were used to test the research hypotheses. This study showed that a strong corporate governance system creates a broad vision of the accounting process and it is associated with reported earnings.

Keywords: Corporate governance; earnings quality; centralization of power; institutional ownership; board independence (search for similar items in EconPapers)
Date: 2013
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