Corporate governance and financial reporting quality: a comparative study

Arshad Hasan, Doaa Aly, Khaled Hussainey

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    Purpose – This paper aims to investigate the impact of corporate governance on financial reporting quality (FRQ) in Pakistan and the UK.

    Design/methodology/approach – In this paper, three accrual-based models are used to analyse FRQ for a sample of 1550 firm-year observations, including 78 Pakistani firms and 77 UK firms, for the period 2009-2018.

    Findings – The analysis shows that board size has a negative impact on FRQ while foreign ownership has a positive impact for Pakistani and UK firms. It also shows that board independence has a positive impact on FRQ of Pakistani firms, while board meetings frequency and audit committee independence have a negative impact. We make no such observation for UK firms. In addition, the analysis shows that board gender diversity and ownership concentration negatively affect FRQ of UK firms. We make no such observation for Pakistani firms.

    Research limitations/implications – Due to the study's focus on Pakistani and UK firms, the findings may not be generalizable to other developed and emerging economies.

    Practical implications – The findings provide valuable insight to policymakers, regulators, and investors by suggesting that the impact of board composition on FRQ of both Pakistani and UK firms is weak. The findings suggest that board size and foreign ownership are the attributes that require regulatory focus to increase FRQ. The negative impact of audit committee independence on FRQ induces rethinking among the policy makers in Pakistan and calls for fully independent audit committees.

    Originality/value – This is the first research endeavour to compare the context of a developed and an emerging economy regarding the impact of corporate governance on FRQ. It also contributes to the governance literature by employing three measures of FRQ and a comprehensive set of corporate governance attributes.
    Original languageEnglish
    JournalCorporate Governance: The International Journal of Business in Society
    Early online date5 May 2022
    Publication statusEarly online - 5 May 2022


    • financial reporting quality
    • corporate governance
    • board composition
    • ownership structure
    • audit committee


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