Governance Reform, Share Concentration and Financial Reporting Transparency in Mexico

39 Pages Posted: 27 Apr 2006

See all articles by Richard A. Price

Richard A. Price

University of Oklahoma

Francisco J. Román

George Mason University - Department of Accounting; George Mason University

Brian Rountree

Rice University - Jesse H. Jones Graduate School of Business

Date Written: April 7, 2006

Abstract

We examine how financial reporting transparency and quality of Mexican firms vary with corporate governance. We utilize compliance data from the Code of 'Best' Corporate Practices, disclosed annually by public firms in Mexico. We document a significant increase in compliance over the 2000-2004 time period along with improvements in earnings associations with both contemporaneous market returns and future cash flows. These results suggest improved governance characteristics may have led to improved financial reporting and transparency. We directly assess this by designating firms with greater compliance as better governed on an annual basis. The results indicate better governed firms do not exhibit statistically less earnings management behavior. Further, these same firms do not exhibit higher earnings persistence nor does the market place greater weights on the reported earnings relative to less well governed firms. We conclude greater compliance does not lead to improved financial reporting transparency or quality because of the concentrated founding family ownership structure predominant in Mexico. Further, improvements in corporate governance and financial reporting requirements are not likely to lead to corresponding improvements in transparency and reporting without adjusting the requirements to accommodate the ownership structure.

Keywords: Corporate governance, corporate transparency, financial reporting, earnings management, discretionary accruals

JEL Classification: G30, M41, J3

Suggested Citation

Price, Richard A. and Román, Francisco J. and Rountree, Brian Robert, Governance Reform, Share Concentration and Financial Reporting Transparency in Mexico (April 7, 2006). Available at SSRN: https://ssrn.com/abstract=897811 or http://dx.doi.org/10.2139/ssrn.897811

Richard A. Price

University of Oklahoma ( email )

307 W Brooks
Norman, OK 73019
United States
405-325-5759 (Phone)

Francisco J. Román (Contact Author)

George Mason University - Department of Accounting

Fairfax, VA
United States

George Mason University ( email )

4400 University Drive
Fairfax, VA 22030
United States
703-993-1849 (Phone)

Brian Robert Rountree

Rice University - Jesse H. Jones Graduate School of Business ( email )

6100 South Main Street
P.O. Box 1892
Houston, TX 77005-1892
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
508
Abstract Views
2,143
rank
54,719
PlumX Metrics