Corporate Governance Determinants of Financial Restatements: A Meta-Analysis

Ahsan Habib, Md. Borhan Uddin Bhuiyan and Julia Wu
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Ahsan Habib: School of Accountancy, Massey University, Private Bag 102904, Auckland, New Zealand
Md. Borhan Uddin Bhuiyan: School of Accountancy, Massey University, Private Bag 102904, Auckland, New Zealand
Julia Wu: Accounting and Information Systems, College of Business and Law, University of Canterbury, Private Bag 4800, Christchurch 8140, New Zealand

The International Journal of Accounting (TIJA), 2021, vol. 56, issue 01, 1-71

Abstract: This paper conducts a meta-analysis of 182 published archival accounting and auditing studies on the corporate governance determinants of financial restatements. We aim to provide a focused and systematic examination of various internal and external corporate governance factors that may predict financial restatements. We do so by aggregating results statistically across individual studies and correcting statistical artifacts, thereby we provide findings that are much more precise than those of narrative reviews. We categorize the chosen governance variables into (a) audit firm and audit engagement characteristics; (b) gender, board attributes, and audit committee attributes; (c) CEO related attributes; (d) ownership structure variables; and (e) external corporate governance variables, and thus we generate a total of 37 separate corporate governance variables. Our results reveal that the governance mechanisms of Big N auditor choice, types, and timeliness of audit opinions and board independence are significantly and negatively associated with the occurrence of financial restatements. However, economic bonding between auditors and their clients, insider ownership, and firm complexity all increase the likelihood of restatements significantly. We hope that our findings will make a meaningful contribution to the literature on financial restatements and corporate governance by providing insights for regulators on the governance mechanisms that may require further scrutiny in combating the occurrence of financial restatements.

Keywords: Financial restatements; corporate governance; external auditing; meta-analysis (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (3)

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DOI: 10.1142/S1094406021500025

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