ASIC Actions: Canaries for Poor Corporate Governance?
Posted: 4 Jul 2008 Last revised: 16 May 2014
Date Written: July 4, 2008
This study investigates whether companies subject to an ASIC action have poorer corporate governance than other companies. We consider a matched sample of 240 companies, including 120 which were subject to 143 actions relating to (a) interpretation of accounting standards, (b) the continuous disclosure regime and (c) other governance matters during the period 1998-2004. We find that companies subject to ASIC actions are less likely to comply with the ASX best practice governance recommendations and that the main area of difference relates to separation of the roles of the CEO and board chair. The results suggest that, in relation to publicised cases, ASIC is effective in targeting more poorly governed companies, a positive signal for Australian capital markets.
Keywords: corporate governance, accounting standards, enforcement, Australian Securities and Investment Commission
JEL Classification: G15, G34, G38, M41, K22
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