The Impact of Internal Governance on Conservatism: Evidence from Australia
Financial reporting decisions can be influenced by the distribution of executive decision-making power. We examine whether internal governance, the process through which the power to make decisions is distributed between CEOs and their subordinates, can influence the level of conservatism in such de...
| Main Authors: | , |
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| Format: | Journal Article |
| Published: |
American Accounting Association
2023
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| Online Access: | http://hdl.handle.net/20.500.11937/92761 |
| _version_ | 1848765662110941184 |
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| author | Liew, Millie Cao, June |
| author_facet | Liew, Millie Cao, June |
| author_sort | Liew, Millie |
| building | Curtin Institutional Repository |
| collection | Online Access |
| description | Financial reporting decisions can be influenced by the distribution of executive decision-making power. We examine whether internal governance, the process through which the power to make decisions is distributed between CEOs and their subordinates, can influence the level of conservatism in such decisions. We show that firms with better internal governance are more conservative. We also find that the effect is more pronounced for firms with less powerful and older CEOs, those with subordinate executives who contribute more, and those who are more mature. We conduct various tests that confirm the robustness of our results. Unlike other studies that focus only on CEOs, we examine how the top management team as a group and the power distribution between CEOs and key subordinates shape financial reporting quality. Our study can inform various stakeholders, including firms aiming to appoint executives and strengthen their internal governance. |
| first_indexed | 2025-11-14T11:38:48Z |
| format | Journal Article |
| id | curtin-20.500.11937-92761 |
| institution | Curtin University Malaysia |
| institution_category | Local University |
| last_indexed | 2025-11-14T11:38:48Z |
| publishDate | 2023 |
| publisher | American Accounting Association |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | curtin-20.500.11937-927612024-01-31T02:13:18Z The Impact of Internal Governance on Conservatism: Evidence from Australia Liew, Millie Cao, June Financial reporting decisions can be influenced by the distribution of executive decision-making power. We examine whether internal governance, the process through which the power to make decisions is distributed between CEOs and their subordinates, can influence the level of conservatism in such decisions. We show that firms with better internal governance are more conservative. We also find that the effect is more pronounced for firms with less powerful and older CEOs, those with subordinate executives who contribute more, and those who are more mature. We conduct various tests that confirm the robustness of our results. Unlike other studies that focus only on CEOs, we examine how the top management team as a group and the power distribution between CEOs and key subordinates shape financial reporting quality. Our study can inform various stakeholders, including firms aiming to appoint executives and strengthen their internal governance. 2023 Journal Article http://hdl.handle.net/20.500.11937/92761 10.2308/JIAR-2022-024 American Accounting Association fulltext |
| spellingShingle | Liew, Millie Cao, June The Impact of Internal Governance on Conservatism: Evidence from Australia |
| title | The Impact of Internal Governance on Conservatism: Evidence from Australia |
| title_full | The Impact of Internal Governance on Conservatism: Evidence from Australia |
| title_fullStr | The Impact of Internal Governance on Conservatism: Evidence from Australia |
| title_full_unstemmed | The Impact of Internal Governance on Conservatism: Evidence from Australia |
| title_short | The Impact of Internal Governance on Conservatism: Evidence from Australia |
| title_sort | impact of internal governance on conservatism: evidence from australia |
| url | http://hdl.handle.net/20.500.11937/92761 |