Accountability and Value Creation Roles of Corporate Governance

41 Pages Posted: 9 Feb 2005

See all articles by Ping-Sheng Koh

Ping-Sheng Koh

ESSEC Business School

Stacie Kelley Laplante

University of Wisconsin - Madison

Yen H. Tong

Nanyang Technological University (NTU) - Nanyang Business School

Date Written: May 2006

Abstract

We examine the twin roles of accountability and value creation of corporate governance in the context of financial reporting. We investigate the accountability role by examining the association between governance structures and abnormal accruals, and the value creation role by investigating the association between abnormal accruals predicted by governance structures and future performance. We differentiate between governance mechanisms that have direct roles in the financial reporting process (audit related governance structures) from mechanisms that have indirect roles (non-audit related governance structures). Our evidence suggests governance attributes important to financial reporting are the existence of independent and active audit committee and board independence. Also, we show that both audit and non-audit related governance structures are value enhancing.

Keywords: Corporate governance, abnormal accruals, future performance, accountability, value creation

JEL Classification: M41, M43, G34

Suggested Citation

Koh, Ping-Sheng and Laplante, Stacie Kelley and Tong, Yen H., Accountability and Value Creation Roles of Corporate Governance (May 2006). Available at SSRN: https://ssrn.com/abstract=664184 or http://dx.doi.org/10.2139/ssrn.664184

Ping-Sheng Koh (Contact Author)

ESSEC Business School ( email )

5 Nepal Park
139408
Singapore
+65 6413 9737 (Phone)

Stacie Kelley Laplante

University of Wisconsin - Madison ( email )

975 University Avenue
Madison, WI 53706
United States
608-265-3494 (Phone)
608-265-3494 (Fax)

Yen H. Tong

Nanyang Technological University (NTU) - Nanyang Business School ( email )

Singapore 639798
Singapore
65-6790-5743 (Phone)

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