The impact of flexible corporate governance disclosures on value relevance. Empirical evidence from South Africa

Show simple item record Tshipa, Johannes (Jonty) Brummer, L.M., 1940- Wolmarans, Hendrik Petrus Du Toit, Elda 2018-02-06T11:49:42Z 2018-02-06T11:49:42Z 2018
dc.description.abstract PURPOSE : Considering that the Johannesburg Stock Exchange (JSE) has enacted in its Listings Requirements, compliance of listed firms to International Financial Reporting Standards (IFRS) and King Code of Good Corporate Governance, this study aims to investigate the impact of internal corporate governance attributes on the value relevance of accounting information in South Africa. DESIGN/METHODOLOGY/APPROACH : The fixed effect generalised least squares regression is used for the period from 2002 to 2014. Proxies for internal corporate governance are the size of the board, leadership structure, board activity, staggered board, boardroom independence, presence of key committees and board gender diversity. Value relevance is measured using the adjusted R2 derived from a regression of stock price on earnings and equity book values by following Ohlson’s accounting-based valuation framework. FINDINGS : The findings suggest that the net asset value per share is value-relevant in South African listed firms and also when the boardroom is largely independent. The value of earnings per share (EPS) is more robust when corporate governance structures, such as separating the roles of chief executive officer and chairperson, proportion of board-independent board members and presence of board committees, are in place. This suggests that EPS favours agency and resource dependence theories. PRACTICAL IMPLICATIONS : The value relevance of accounting information in the South African financial market underscores the importance of requisite rules and supervision regarding financial reporting to allow asset owners and managers in the allocation of capital decisions. This study supports the view that corporate governance plays a key role in ensuring, amongst others, credible financial reporting. The outcome of this study could inform the JSE to enforce, even stricter, compliance with IFRS and corporate governance to improve the value relevance of financial information. SOCIAL IMPLICATIONS : Significant corporate governance reforms around the world suggest that regulators and policy makers consider corporate governance as a pertinent tonic in ensuring, amongst others, credible financial reporting. The implications of the study might assure users of financial information of how compliance to corporate governance practices may influence the value of the firm. This paper provides empirical evidence in the South African context that EPS, unlike net asset value per share, is driven by corporate governance structures. ORIGINALITY/VALUE : The period of this study is unique, because it covers a relatively stable economic period before the financial crisis, a challenging and unstable period of time when the financial crisis materialised, and the aftermath of the financial crisis. In addition, the examination period of the study also covers the two corporate governance reforms in South Africa, King II in 2002 and King III in 2009, as well as the new Companies Act No. 71 of 2008. These exogenous factors may influence the results. en_ZA
dc.description.department Financial Management en_ZA
dc.description.librarian hj2018 en_ZA
dc.description.uri en_ZA
dc.identifier.citation Jonty Tshipa, Leon Brummer, Hendrik Wolmarans, Elda Du Toit, (2018) "The impact of flexible corporate governance disclosures on value relevance. Empirical evidence from South Africa", Corporate Governance: The International Journal of Business in Society, Vol. 18 Issue: 3, pp.369-385, en_ZA
dc.identifier.issn 1472-0701
dc.identifier.other 10.1108/CG-05-2017-0106
dc.language.iso en en_ZA
dc.publisher Emerald en_ZA
dc.rights © Emerald Group Publishing Limited en_ZA
dc.subject Value relevance en_ZA
dc.subject Non-executive directors en_ZA
dc.subject Management en_ZA
dc.subject Investors en_ZA
dc.subject Governance en_ZA
dc.subject Disclosure en_ZA
dc.subject Corporate governance en_ZA
dc.subject Compliance en_ZA
dc.title The impact of flexible corporate governance disclosures on value relevance. Empirical evidence from South Africa en_ZA
dc.type Postprint Article en_ZA

Files in this item

This item appears in the following Collection(s)

Show simple item record