INTRODUCTIONBackground to the Study The emergence of corporate governance in organisational management in the 1970s preluded the development of internal control mechanism to give assurance for accountability and probity in firm’s management (Wan & Idris, 2012). The rationale for corporate governance, in general, is the need to ensure that management …
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INTRODUCTIONBackground to the Study The emergence of corporate governance in organisational management in the 1970s preluded the development of internal control mechanism to give assurance for accountability and probity in firm’s management (Wan & Idris, 2012). The rationale for corporate governance, in general, is the need to ensure that management of companies are done in a way that is in the interest of shareholders and provide confidence for investors (Rezaee, 2009). Thus, effective corporate governance is one that ensures investors and shareholders of a company are protected against expropriation and ensure judicious use of the companies’ resources by management. For any organisation to achieve the goal of effective corporate governance, the board of directors who are in charge of corporate governance must possess the necessary professional competence and ability to be able to put in the necessary control measures to ensure effectiveness in the operation of the firm. Board characteristics of both public and private organisations have become areas of public concern and academic scrutiny as means of determining the confidence that should be placed on companies. Some studies have already demonstrated that board characteristics of firms influence earnings management (Al Azeez et al., 2019), financial performance (Anis et al., 2017) and survival of firms (Goktan et al., 2018). The board characteristics of interest in most recent studies include gender diversity, board size, CEO duality, board independence, board education, board experience, board ownership, board compensation among many others. The effect of the various characteristics of interest varies across studies, firms, industry, country and regions. In the study by Al Azeez et al. (2019) for instance board independence, board gender and CEO duality were found to have significant impact on earnings management in oil and gas sector. Kao and Chen (2004) also found significant impact of board characteristic on earnings management only for group affiliation firms or non-electronic firms. An area of great importance in organizational management where the effect of board characteristics has also been noted in compliance with accounting standard and quality of accounting report of their financial transactions. As Atherton et al. (2011) notes, the governing board of any company have three (3) principal fiduciary responsibilities to its stakeholder’s viz. the duty of care, the duty of loyalty and the duty of obedience, as mandated by state and common law. Therefore, quality, reliable and accurate accounting reports become the most essential document for stakeholders to judge the level of adherence of the board to its fiduciary responsibilities. An ill-prepared and poor-quality accounting reports signifies failure of board on their responsibilities. Incidence of fraudulent financial reporting and poor-quality accounting reports are common and, in some cases, found to be associated with board characteristics and quality of internal control systems (Donelson et al., 2017) Studies have shown certain characteristics of boards to be highly associated with the quality of accounting reports and adherence to best practice in financial reports. Gouiaa and Zéghal (2014) for instance found board characteristics such as board size, audit committee size among other board characteristics to have influence quality accounting information among listed firms in Canada. The observations made by Gouiaa and Zéghal (2014) however are delimited to the particular context of Canada and representative of the situation in other countries especially in developed countries. This notwithstanding, such observations spark interest and curiosity as to how board characteristics influence financial reporting quality especially in developing countries such as Ghana where institutions and legal system are not as strong as that of developed countries such as Canada where significant effect of board characteristics on financial reporting quality has been found.
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