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Do corporate governance recommendations improve the performance and accountability of small listed companies?
Author(s) -
Christensen Jacqueline,
Kent Pamela,
Routledge James,
Stewart Jenny
Publication year - 2015
Publication title -
accounting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.645
H-Index - 49
eISSN - 1467-629X
pISSN - 0810-5391
DOI - 10.1111/acfi.12055
Subject(s) - accounting , corporate governance , business , accountability , audit , earnings , audit committee , earnings quality , quality (philosophy) , compliance (psychology) , quality audit , finance , accrual , political science , law , psychology , social psychology , philosophy , epistemology
This study examines whether the implementation of the 2003 Australian Securities Exchange Limited governance recommendations influenced the governance choices of small companies and whether compliance improves their accounting and market performance and earnings quality. Our analysis examines small and large companies because we are interested in the different effects of the governance recommendations on the two groups. The analysis shows a significant shift by small and large companies to comply with the recommendations around the time of their introduction. We find that formation of an audit committee surrounding the reform period is significantly associated with improved earnings quality for small and large companies. However, compliance with other governance recommendations is not systematically associated with improved performance or earnings quality.