Corporate Governance and the Information Content of Earnings Announcements: A Cross-Country Analysis

S.T. Lau, K. Shrestha, Jing Yu

Research output: Contribution to journalArticle

4 Citations (Scopus)

Abstract

© CAAAUsing firm-level data from 23 developed markets, we document a positive association between overall firm-level governance quality and the informativeness of earnings announcements measured by abnormal stock return variance. This finding is robust after controlling for the potential endogeneity of firm-level corporate governance. Further analyses reveal that firms with strong governance show little evidence of earnings management, appoint Big 4 auditing firms, and attract analyst following, implying a positive link between strong corporate governance and the information quality of earnings announcements. Finally, there is some evidence that the relation between firm-level governance and market reactions around the announcements exists only in countries characterized by a transparent information environment and strong legal investor protection.
Original languageEnglish
Pages (from-to)1238-1266
JournalContemporary Accounting Research
Volume33
Issue number3
DOIs
Publication statusPublished - 2016

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