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

Posted: 27 Oct 2014 Last revised: 18 Aug 2016

See all articles by Sie Ting Lau

Sie Ting Lau

Nanyang Technological University (NTU) - Division of Banking & Finance

Keshab Shrestha

Monash University Malaysia

Jing Yu

The University of Sydney; Financial Research Network (FIRN)

Date Written: July 29, 2014

Abstract

Using 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.

Keywords: Earnings Announcements, Information Content, Corporate Governance, Investor Protection

JEL Classification: G10, G14, G15

Suggested Citation

Lau, Sie Ting and Shrestha, Keshab and Yu, Jing, Corporate Governance and the Information Content of Earnings Announcements: A Cross-Country Analysis (July 29, 2014). Contemporary Accounting Research, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2515162

Sie Ting Lau

Nanyang Technological University (NTU) - Division of Banking & Finance ( email )

S3-B1B-76 Nanyang Avenue
Singapore, 639798
Singapore
65 790 6051 (Phone)
65 791 3697 (Fax)

Keshab Shrestha

Monash University Malaysia ( email )

Jalan Lagoon Selatan
Bandar Sunway
Jalan Lagoon Selatan, Selangor 46150
Malaysia

Jing Yu (Contact Author)

The University of Sydney ( email )

University of Sydney
Sydney, NSW 2006
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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