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        Do Variations in the Strength of Corporate Governance Still Matter? A Comparison of the Pre- and Post-regulation Environment

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        Do Variations in the Strength of Corporate Governance Still Matter? A Comparison of the Pre- and Post-Regulation Environment (263.5Kb)
        Date
        2014-07
        Author
        Harp, Nancy
        Myring, Mark
        Shortridge, Rebecca Toppe
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        Abstract
        Corporate scandals brought the issue of corporate governance to the forefront of the agendas of lawmakers and regulators in the early 2000s. As a result, Congress, the New York Stock Exchange, and the NASDAQ enacted standards to improve the quality of corporate governance, thereby enhancing the quantity and quality of disclosures by listed companies. We investigate the relationship between corporate governance strength and the quality of disclosures in pre- and post-regulation time periods. If cross-sectional differences in corporate governance policies affect the quality of financial disclosures, the quality of information available to analysts varies with such policies. Specifically, higher quality disclosures, produced as a result of strong corporate governance, should lead to more accurate and less dispersed analysts’ forecasts. Our analysis suggests that voluntary implementation of stronger corporate governance enhanced the quality of disclosures in the pre-regulation period; however, exceeding current corporate governance standards does not appear to result in higher quality disclosures post-regulation. These results suggest that SOX and the stronger regulations enacted by U.S. exchanges were effective in reducing variation in the quality of financial information available to investors.
        URI
        https://commons.lib.niu.edu/handle/10843/18534
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        • Department of Accountancy Faculty Publications
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