The impact of audit committee, CEO, and external auditor quality on the quality of financial reporting

摘要

Purpose - This paper aims to explore the influence of corporate governance (CG) components on the quality of financial reporting (QFR). The components investigated are the Audit Committee (AC), CEO and external auditor quality. The study also examines whether the AC mediates the effects of other components of CG on the QFR. Design/methodology/approach - Data were collected from 386 listed companies in four European countries for the period 2015-2017. The QFR was measured using two proxies, discretionary accruals and accruals quality. Firstly, an OLS regression model was estimated to measure the effects of the three variables investigated on the QFR, and to determine which of these variables had the greatest influence in this relationship. Secondly, several mediation analyses were performed to test whether the AC mediates the effects of the CEO, and external auditor quality on the QFR. Findings - The findings reveal that each of these three components has a positive impact on the QFR, but that the AC has the greatest effect in this respect. The findings also indicate that the AC mediates the effect of the CEO on the QFR. Alternative tests and different measures for the variables confirm the robustness of the results obtained. Practical implications - Significant implications are provided for regulators and policy-makers. Findings of the present study help regulators and policymakers to pay more attention to the enforcement of AC policies, and the appointment of AC members. Further, the results are helpful to policy-makers concerned with improving CG, and who need evidence of the role of high QFR in this matter. Originality/value - The findings provide insights into the effect of CG on QFR, and into the most influential component in this relationship; hence, they make a valuable contribution to the literature. They also contribute to the topic of mediations analysis in CG research, providing additional evidence that the AC mediates the effects of the CEO, and external auditor quality on the QFR.