Corporate governance and financial information quality: a simultaneous equations approach in the Tunisian context Online publication date: Mon, 03-Mar-2014
by Nesrine Klai; Abdelwaled Omri
International Journal of Corporate Governance (IJCG), Vol. 4, No. 1, 2013
Abstract: In this study, we investigate the relationship between corporate governance and financial information quality in an emerging market which is Tunisia. Specifically, we address the problem of endogeneity and the possible reverse causality between governance structures and accounting quality using a simultaneous equations approach. On the basis of a sample of non-financial listed firms, we highlight the importance of the board composition and the identity of the shareholders as governance mechanisms that could affect the financial reporting quality, as well as the interaction of control mechanisms. The empirical results confirm the reverse causality between corporate governance and financial information quality in Tunisian firms. Specifically, we find that good corporate governance is associated with high quality of financial information. At the same time, the low quality of financial reporting involves the implementation of appropriate governance structures that confirms the governance role of accounting in the Tunisian context.
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