The association between corporate governance mechanisms and compliance with IFRS mandatory disclosure requirements: evidence from 12 African countries

Abstract

Purpose The purpose of this study is to examine the association between two corporate governance (CG) mechanisms, namely, the board of directors and the audit committee (AC) and the compliance level with International Financial Reporting Standards (IFRS) mandatory disclosure requirements across 12 African countries. Design/methodology/approach This paper uses a self-constructed checklist of 140 items to measure the compliance with IFRS mandatory disclosure requirements (here after, COMP) of 202 non-financial listed firms during the 2012–2016 period. This paper applies panel regressions. Findings The findings reveal that CG mechanisms play an important role in enhancing compliance with IFRS in the African context. The results show that board independence, AC independence and the number of meetings held by the AC are positively associated with COMP. Regarding expertize, this paper find that AC industry expertise along with accounting financial expertise is associated with a higher level of COMP than accounting financial expertize alone. These results show the importance of the CG mechanisms to enforce African companies to fully comply with IFRS required disclosures. Practical implications The findings should give a signal to supervisory authorities that more effort is necessary to enforce IFRS across African countries if the introduction of IFRS is to bring the expected benefits to investors and other users. Hence, the lack of full compliance should remain a concern for regulators, professional accounting bodies and policymakers. Originality/value This study contributes to the literature by providing further insights that, within the African region an understudied context, extend current understanding of the association between CG mechanisms and COMP.

The evolution of corporate governance and agency control: the effectiveness of mechanisms in creating value for companies with IPO on the Brazilian stock exchange

“…There is a growing recognition of the critical role of GC mechanisms in increasing the quality of financial reporting, aligning management interests with those of shareholders, and reducing agency and information asymmetry problems (Juhmani, 2017). However, for investors, analysts and other users, our results confirm the concern that compliance with mandatory disclosure requirements for accounting information and, more generally, the implementation of auditing and audit may increase the control, interpretation and comparability of financial statements of companies, shareholders and stakeholders (Mnif and Borgi, 2020).…”

“…There is a growing recognition of the vital role of GC mechanisms in enhancing financial reporting quality, aligning management’s interests with those of the shareholders, and reducing the agency and information asymmetry problems (Juhmani, 2017). This recognition is reflected in its popularity in the area’s research, being the theory most used (Mnif and Borgi, 2020).…”

Compliance level with IFRS disclosure requirements across 12 African countries: do enforcement mechanisms matter?

“…The derivation of the dependent variable follows most of the prior compliance studies (Street and Gray, 2001; Glaum and Street, 2003; Al-Shammari et al , 2008; Tsalavoutas, 2011; Glaum et al , 2013; Appiah et al , 2016; Juhmani, 2017; Mazzi et al , 2017; Sellami and Fendri, 2017; Mazzi et al , 2018; Sellami and Borgi, 2020; Mnif and Borgi, 2020) that developed comprehensive checklists for disclosure practices.…”

“…In their review of literature on IFRS in Africa, Tawiah and Boolaky (2019) call for more investigations on the enforcement of IFRS in Africa to discover how best to ensure compliance. In addition, Mnif and Borgi (2020) suggest that researchers should look into the country-level factors of compliance with IFRS disclosure requirements in the African context to complement their study on the association between corporate governance and compliance with IFRS in 12 African countries.…”

“…In their review of literature on IFRS in the continent of Africa, Tawiah and Boolaky (2019) call for more investigations on the enforcement of IFRS in Africa to discover how best to ensure compliance. In addition, Mnif and Borgi (2020) suggest that researchers look into the country-level factors of compliance with IFRS disclosure requirements in the African context to complement their study on the association between corporate governance and compliance with IFRS in 12 African countries. Concerning compliance literature in the context of Africa, Sellami and Borgi (2020) provide evidence that countries with high-quality governments are more likely to strongly enforce IAS 24 “Related party disclosures” in eight African countries.…”