Corporate Governance and Financial Reporting Quality: The Moderating Role of Financial Misconduct

Document Type : Original Article

Authors

• Amir Ata Alizadeh ¹
• Akbar Valizadeh Oghani ²

¹ M.A in Accounting, Seraj Institute of Higher Education, Tabriz, Iran

² Assistant Professor, Department of Management and Accounting, Sarab Branch, Islamic Azad University, Sarab, Iran

Abstract

In companies where financial misconduct is prevalent, financial data often lack sufficient accuracy and transparency, leading to reduced stakeholder trust. Moreover, such misconduct weakens corporate governance mechanisms in monitoring and control. The present study aims to examine the impact of financial misconduct on the relationship between corporate governance and financial reporting quality. This research is applied in terms of its objective and belongs to the categories of descriptive-correlational and causal-comparative studies. To achieve the research objectives and test the statistical hypotheses, a five-year period from 2018 to 2022 was examined across 133 companies listed on the Tehran Stock Exchange. Data collection and analysis were conducted using EViews software and the multiple regression method. The research findings revealed a significant negative relationship between institutional ownership and financial reporting quality. Similarly, an inverse and significant relationship was observed between board independence and financial reporting quality. Financial restatements, as an indicator of financial misconduct, had a significant negative impact on the relationship between institutional ownership and financial reporting quality. However, the impact of financial restatements on the relationship between board independence and financial reporting quality was not significant.

Keywords

• Institutional Ownership
• Board Independence
• Financial Reporting Quality
• Financial Misconduct
• Financial Statement Restatements

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