To read this content please select one of the options below:

Corporate governance and value relevance of accounting information: Evidence from Kuwait

Hesham I. Almujamed (Department of Accounting, Public Authority for Applied Education and Training, Kuwait City, Kuwait)
Mishari M. Alfraih (Department of Accounting, Public Authority for Applied Education and Training, Kuwait City, Kuwait)

International Journal of Ethics and Systems

ISSN: 2514-9369

Article publication date: 8 April 2020

Issue publication date: 22 April 2020

568

Abstract

Purpose

This paper aims to explore how the characteristics of the board of directors (BoD) shape earnings and book value information available to market participants.

Design/methodology/approach

The authors investigated the impact of board size, presence of non-executives and role duality as proxies of effective corporate governance on the value relevance of financial reporting for 178 firms on the Kuwait stock exchange in 2013. Regression analysis based on Ohlson’s (1995) valuation model was used to test hypotheses.

Findings

The authors found that board size was significantly associated with company value and that Kuwaiti firms with large boards increased the value-relevance of earnings and book value. The influence of role duality was positive although not significant. The presence of non-executives on the board had a negative correlation with market value (not significant).

Research limitations/implications

These findings deliver empirical support for the prediction that the characteristics of the BoD improve the value relevance of financial reporting. Limitations such as small sample size and one-year duration of the study did not negate the basic findings, however. Future studies will use larger samples, longer duration and additional board characteristics.

Practical implications

This study provides empirical support for the hypothesis that board size influences market valuation. This study may benefit managers, investors and other decision-makers.

Originality/value

This study delivers empirical evidence on the impact of board characteristics on the value relevance of accounting information. It will be useful for regulators and market participants monitoring the influence of board characteristics on the value relevance of accounting information.

Keywords

Citation

Almujamed, H.I. and Alfraih, M.M. (2020), "Corporate governance and value relevance of accounting information: Evidence from Kuwait", International Journal of Ethics and Systems, Vol. 36 No. 2, pp. 249-262. https://doi.org/10.1108/IJOES-08-2019-0140

Publisher

:

Emerald Publishing Limited

Copyright © 2020, Emerald Publishing Limited

Related articles