The Role of Corporate Governance in Investment Efficiency and Financial Information Disclosure Risk in Companies Listed on the Tehran Stock Exchange

Abstract

This study’s primary purpose is to investigate corporate governance’s role in investment efficiency and financial information disclosure risk in companies listed on the Tehran Stock Exchange. A multivariate linear regression model based on the panel data model was used to test the research hypotheses. The results of the survey of 140 companies listed on the Tehran Stock Exchange from2015 to 2021 indicate that investment efficiency has increased by increasing the quality of corporate governance. In addition, research findings show that improving the quality of corporate governance reduces the risk of financial information disclosure. The life cycle and firm size were used to evaluate the robustness of the results obtained in this study. It was observed that improving corporate governance in companies in the stages of growth and maturity increases investment efficiency and reduces the financial information disclosure risk. In contrast, in companies that are in the decline stage, it reduces investment efficiency and increases the risk of financial information disclosure. In terms of firm size, it was also observed that, in small firms, as corporate governance increases, investment efficiency decreases, and the risk of financial information disclosure increases. However, investment efficiency and financial information disclosure reduce risk by improving large companies’ corporate governance.

Corporate Governance Dynamics: Contending with Egocentric Leadership and Enhancing Board Efficacy

“…The results showed a strong correlation between corporate governance and firm performance, indicating that effective corporate governance can lead to sustainable firm performance over the long term. Kashani & Mousavi Shiri (2022) explored the role of corporate governance in investment efficiency and financial information disclosure risk in companies listed on the Tehran stock exchange. The study found that improving the quality of corporate governance can significantly reduce the risk of financial information disclosure.…”

“…Effective corporate governance is enormously dependent on the boards of directors, as they play a crucial role in overseeing the risk management practices of a company (Kashani & Mousavi Shiri, 2022). Therefore, these authors highlight that it is imperative to establish a well-structured board with independent directors and maintain transparent communication with the leaders.…”

Integrity of Financial Statement Factors: Intellectual Capital, Independent Commissioner, and Company Size

“…The size of a corporation has little influence on the accuracy of its financial records, regardless of any assertions suggested otherwise. While not all big firms have extensive experience in preparing financial statements, small enterprises often have more proficiency in ensuring the accuracy of their financial records (Kashani & Mousavi Shiri, 2022). Therefore, financial statement integrity is not guaranteed by a tiny company's size, as shown by a modest market capitalization, book value, and earnings.…”

Investigating the moderating role of past behavior in the relationship between risk aversion and investment choice in the Tehran stock market

“…The Tehran Stock Exchange has seen increased fraudulent reporting through transactions with related parties, highlighting the need for effective corporate governance (Pakdelan et al, 2022). Additionally, the quality of corporate governance has been found to impact investment efficiency and the risk of financial information disclosure (Kashani & Mousavi Shiri, 2022). Furthermore, the optimal selection of stock portfolios using multi-criteria decision-making methods has been studied, providing insights into maximizing returns and minimizing risk (Jing et al, 2023).…”