Corporate Governance And Value Relevance

The utility of the concept of corporate governance has grown over time,with the expansion of globalization around the world and especially with the successive crises(financial,social,and real estate crises)all over the world in the last thirty years.The situation demonstrates that corporate governance is one of the primary concepts used to achieve a variety of managerial and business strategic goals.According to studies,when well-built and well-managed,excellent corporate governance can have a multiplier effect on economic growth.Furthermore,studies revealed that corporate governance mechanisms play an important role in issues involving agency conflicts between agents and principals in the same company,as well as in the production of high-quality accounting information.Corporate governance serves two critical functions.A foreign investor mainly looks at the protection,the growth of his best interests(aversion for agency cost and fraud risk),and the relevance of the quality of the accounting information(earnings,book value,and firm value)before making a decision to invest in or not invest in a company.Otherwise,to attract foreign investment to finance their economies,African countries might focus on corporate governance mechanisms as a strategic tool in their developing plans.Moreover,successive enterprise failures around the world showed the limits of the current corporate governance systems and their institutions(IASB)all over the world.Knowing the key role of corporate governance,countries and international institutions will implement new corporate governance practices,regulations,laws,and new international accounting standards to support the existing ones judged irrelevant and not transparent enough.For instance,the international financial accounting standards(IFRS)were created to be used in support of the obviously existing IAS(International Accounting Standards).Based on the efficiency market theory and the positive accounting theory,the objective of this research is to focus on the case of African stock markets in order to make a diagnosis of the positive incidence of corporate governance on the relevance of value in African countries.The lack of literature related to the relationship between corporate governance and the value relevance association in the African stock exchange,as well as the misunderstanding or misperception of corporate governance practices,laws,regulations,and codes in the African context,motivated this study.This study examines and measures the impact level of three major corporate governance variables(Board Committee,Audit Committee,and Ownership Committee)and their instruments(Size,Independence,Expertise,Government,Foreign,and Management Ownership)on the relevance of accounting information and market value metrics in African stock markets.These corporate governance variables are usually selected to determine the quality level of the corporate governance index in the stock markets of many countries.The dissertation,titled "Corporate Governance and Value Relevance: Evidence from African Stock Exchanges," is presented as follows:The first chapter serves as an introduction,explaining the background and significance of the study,the main objectives and contents of the study,the research methodology,the main contributions,and the organization of our work plan.A second chapter titled "Literature Review" includes a literature review of the value relevance notion,a literature review of the corporate governance notion,and a literature review of the effect of corporate governance on value relevance.Chapter 3 titled “theoretical analysis and hypothesis development” includes two parts.The first part provides an institutional background,including a brief presentation of the functioning of the stock market and corporate governance in our study sample,as well as a brief presentation of the IFRS and new corporate regulation standards used in this study as moderators in the relationship between corporate governance and value relevance;the second part concerns the presentation of the theoretical analysis and hypothesis development.The chapter 4 titled "Research Methodology" describes how the research design of this study is carried out,how the sample of the study is chosen,how data sources are gathered,how study variables are calculated,and how methods are tested.Chapter 5 presents the empirical test results and discussions of the study.At this level,descriptive statistics and multivariate regression tests are performed along with their results.Chapter 6 serves as a general conclusion,discussing policy implications,study limitations,and future directions.This study employs panel regression analysis,which is supported by univariate and multivariate regressions.This study employs panel regression analysis,which is supported by univariate and multivariate regressions.It is mainly based on Ohlson’s(1995)price model,return model,and compliance index model according to the positive accounting theory and efficiency theory literature.Corporate governance variables(board structure,audit committee,and ownership structure)in its research for higher voluntary compliance with IFRS and good corporate governance requirements would have a positive and significant impact on the relevance of stock market metrics(stock price,earnings per share,and book value per share)in the African stock market.Between 2010 and 2020,the study used a sample of non-financial listed companies from ten African stock exchanges,with 3660 observations per firm per year.According to the literature review,the results are multiple and varied.The main findings conclusions show that corporate governance is positively significant to value relevance;the relationship between corporate governance and value relevance is more pronounce under IFRS and the relationship between corporate governance and value relevance is more pronounce under CGA(corporate governance Act).The three main contributions of this research can be summarize as following:1.The data used in this study are unique.The unique data is from Africa,and not all existing findings provide evidence for Africa.2.This study uses the DID method to examine the relationship between corporate governance and value relevance on African stock exchanges.3.The findings of this study have important implications for regulators,academics,investors,and other users regarding the effects of IFRS and corporate governance act(CGA)on the relationship between corporate governance and accounting information relevance in the African stock market.