Corporate Governance And The Quality Of Financial Disclosures

Abstract

Congress has recently enacted measures designed to improve corporate governance standards. Regulators have asserted that strong corporate governance enhances the transparency and validity of financial statements. Previous studies addressing the relationship between corporate governance and financial reporting quality yield mixed results. This study employs analyst earnings forecasts to determine whether corporate governance procedures impact the quality of accounting information. Following the work of Barron et al. (1998), we examined the impact of various measures of the strength of corporate governance on forecast accuracy and dispersion. Our results provide mixed evidence to support the notion that the strength of corporate governance impacts the quality of financial statement information.