TY - JOUR
T1 - Corporate governance and transparency
T2 - evidence from stock return synchronicity
AU - Ntow-Gyamfi, Matthew
AU - Bokpin, Godfred Alufar
AU - Gemegah, Albert
N1 - Publisher Copyright:
© 2015, © Emerald Group Publishing Limited.
PY - 2015/5/5
Y1 - 2015/5/5
N2 - Purpose – The purpose of the study is to examine the influence of corporate governance on the flow of firm-specific information in an emerging market. Design/methodology/approach – Synchronicity is estimated under assumptions of contemporaneous and non-contemporaneous relationship between individual stock returns and the market return. Possible thin-trading effect is also corrected using the Dimson’s Beta approach to estimate synchronicity. In the main empirical model, both the Panel-Corrected Standard Errors and the Generalized Least Square estimations were used to provided robust evidence of governance influencing transparency. Findings – Corporate governance was found to broadly influence the release of firm-specific information in a relatively opaque market through the information environment. However, no evidence in support of the “auditor-reputation effects” theory was found. As well, CEO duality does not create an individual powerful enough to reduce the monitoring role of boards. We further document the presence of noise trading on the Ghana Stock Exchange. Practical implications – This study suggests that specific corporate mechanism practices have implications for stock selection in a relatively high information asymmetry Capital Market. Investors require transparency; hence, firms with governance mechanisms that elicit such transparency are likely to attract investors. Originality/value – This study is the first to examine the relationship between governance and transparency while using stock return synchronicity as a proxy for transparency in an emerging Ghanaian Capital Market.
AB - Purpose – The purpose of the study is to examine the influence of corporate governance on the flow of firm-specific information in an emerging market. Design/methodology/approach – Synchronicity is estimated under assumptions of contemporaneous and non-contemporaneous relationship between individual stock returns and the market return. Possible thin-trading effect is also corrected using the Dimson’s Beta approach to estimate synchronicity. In the main empirical model, both the Panel-Corrected Standard Errors and the Generalized Least Square estimations were used to provided robust evidence of governance influencing transparency. Findings – Corporate governance was found to broadly influence the release of firm-specific information in a relatively opaque market through the information environment. However, no evidence in support of the “auditor-reputation effects” theory was found. As well, CEO duality does not create an individual powerful enough to reduce the monitoring role of boards. We further document the presence of noise trading on the Ghana Stock Exchange. Practical implications – This study suggests that specific corporate mechanism practices have implications for stock selection in a relatively high information asymmetry Capital Market. Investors require transparency; hence, firms with governance mechanisms that elicit such transparency are likely to attract investors. Originality/value – This study is the first to examine the relationship between governance and transparency while using stock return synchronicity as a proxy for transparency in an emerging Ghanaian Capital Market.
KW - Accounting and auditing
KW - Corporate finance and governance
KW - M4
UR - http://www.scopus.com/inward/record.url?scp=84997294309&partnerID=8YFLogxK
U2 - 10.1108/JFEP-10-2013-0055
DO - 10.1108/JFEP-10-2013-0055
M3 - Article
AN - SCOPUS:84997294309
SN - 1757-6385
VL - 7
SP - 157
EP - 179
JO - Journal of Financial Economic Policy
JF - Journal of Financial Economic Policy
IS - 2
ER -