Relations among audit committee establishment, information transparency and earnings quality: evidence from simultaneous equation models

Either shareholders or related parties typically serve as the directors and supervisors of listed companies in Taiwan. Consequently, the managerial and supervisory functions of certain companies have failed to meet shareholder expectation, and there have been numerous cases where managers have embez...

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Bibliographic Details
Published in:Quality & quantity 2016-11, Vol.50 (6), p.2417-2431
Main Authors: Wang, Mao-Chang, Lee, Meng-Han, Chuang, Jia-Jiann
Format: Article
Language:English
Subjects:
Accounting
Analysis
Audit committees
Audits
Boards of directors
Commercial banks
Committees
Corporate governance
Disclosure
Earnings
Earnings management
Financial statements
Governance
Information
Methodology of the Social Sciences
Quality
Securities markets
Social responsibility
Social Sciences
Stockholders
Studies
Supervision
Transparency
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Summary:Either shareholders or related parties typically serve as the directors and supervisors of listed companies in Taiwan. Consequently, the managerial and supervisory functions of certain companies have failed to meet shareholder expectation, and there have been numerous cases where managers have embezzled company assets and inflated company earnings. Therefore, we contend that strong corporate governance should be established, and the supervision system should be improved. First, we discuss the relationship between establishing an audit committee and information transparency and that between audit committee establishment and earnings quality. Subsequently, we describe results obtained by employing simultaneous equation models to examine the interactions among audit committee establishment, information transparency, and earnings quality for companies in the Taiwan electronics industry in 2011. Our empirical results show that establishing an audit committee correlates positively with both information transparency and earnings quality. The simultaneous equation models result show that interactive and positive effects exist among audit committee establishment, information transparency, and earnings quality.
ISSN:0033-5177
1573-7845
DOI:10.1007/s11135-015-0269-y