Bank Corporate Governance and Future Earnings Predictability
41 Pages Posted: 19 May 2015 Last revised: 29 Jul 2015
Date Written: May 16, 2015
This study examines the impact of corporate governance on earnings predictability in large banks from 35 countries over the period 2004-2010. We find that board structure and CEO power have a significant positive influence on earnings predictability of future cash flows although these findings vary for emerging markets and between common and civil law countries. Board structure and CEO power are more effective in predicting future cash flows in civil law countries whereas in common law countries risk governance is a more accurate predictor of earnings. Similarly, we find differences between developed and emerging countries. While in both domains there is no qualitative difference in CEO power to predict future cash flows, board structure and risk governance are less effective in emerging countries.
Keywords: Earnings Predictability, Corporate Governance, Bank, GAAP/IFRS
JEL Classification: G21, G32, G38
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