Corporate Governance and Accounting Information Quality of Listed Firms in Ghana

Abstract

Although the issue of corporate governance and accounting information quality appears to be popular amongst developed economies, the same cannot be said for their developing counterparts. European research has documented improved accounting information quality to firms that are engaged in good corporate governance practices. The purpose of this research is to examine the relationship between the internal corporate governance mechanisms and accounting information quality which uses discretionary accrual as a proxy. The empirical research is based on a sample of twenty non-financial institutions listed on the Ghana Stock Exchange for an eleven-year period, (2003-2013). The results of the study show that operational earnings are more persistent than operational cash flow which suggests that in predicting future values from current ones, operational earnings gives a better output than operational cash flows. Also, board independence served as a constraint to the behaviour of the managers. Thus when there are more independent directors on the board, managers would be discouraged from managing earnings leading to a higher level of accounting information quality. Foreign ownership is also seen as a constraint to the opportunistic behaviours of managers therefore firms that have more than fifty percent of its ownership in the hands of foreigner, record a higher level of accounting information quality. The findings of this study have important implication for policy formulators, practice and academia.