Corporate governance and value relevance of financial information: evidence from the Ghana Stock Exchange

Abstract

Purpose -This study aims to look at how corporate governance, specifically internal mechanisms of corporate governance, affects the value relevance of reported accounting earnings of listed firms on the Ghana Stock Exchange.Design/methodology/approach -The study used the Ohlson valuation model with a panel dataset, employing pooled regression analysis with random effects.Findings -The findings indicate that net asset value per share is value relevant on the Ghanaian market, and even more so when the board size is small or the CEO also doubles as the board chair. Board independence as captured by the percentage of non-executive directors on the board is relatively irrelevant in the market valuation of shares, and when relevant has a negative effect.Originality/value -The value relevance of accounting information on the Ghanaian financial market, by implication, requires that the necessary rules and supervision regarding financial reporting must be provided to ensure that the information that reaches the investing public is therefore a true reflection of the underlying economic value of firms, so that capital allocation decisions based on these sources will be efficient.

Directors characteristics and stock market performance in Canada

“…It shows that the board of directors carries out its control functions, while ensuring transparent communication of information issued by the upper management of the company. Fiador (2013) confirms that the financial information disclosed provides better transparency. Similarly, according to Hassan (2011), the practice of disclosure of financial information reduces the asymmetry of information and incentives for the creation of good conditions in public enterprises management, which contributes positively to the improvement of corporate governance.…”

“…This control is a schematic transparency in financial reporting (Fiador, 2013). The relevance of financial information in the developed countries has been well documented since the seminal work of Ball and Brown (1968).…”

“…So better financial information reduces the risk estimation for investors, helps to distinguish good from bad managers, thus reduces agency costs, minimizes the level of information asymmetry and helps investors to distinguish good from bad investments (Fiador, 2013). The production of high-quality financial information appears to be related to the presence of excellent corporate governance.…”

“…The financial information of listed companies is the main mode of communication with investors. The relevance of financial information seems to indicate a greater importance for companies with strong governance structures (Fiador, 2013).…”

“…The publication of financial information is to create a safe environment for stakeholders through a culture of transparency. Also, transparency makes information on current conditions visible and understandable to all market participants (Fiador, 2013). The disclosure of financial information generally reduces the presence of asymmetric information, prompting the company to voluntarily publish the listed corporate governance practices (Hassan, 2011).…”