The Effects of Governance Mechanisms on the Financial Information Quality

Abstract

Accounting and financial information is important for the users of financial statements. It is therefore an essential component of the economy. For this reason, any manipulation or fraud that affects the basic accounting information could affect the economy as a whole. This raises the question of whether the financial information provided by companies is reliable or not. Moreover, the financial scandals that marred some companies in the world, such as the "Enron" American oil company, the "WorldCom", "Xerox" and the Italian "Parmalat" dairy group, suggest the caution taken against the production and the use of financial information. Actually, the accounting regulatory agencies, the authorities acting on the financial markets and the different users of financial information questioned both the transparency and credibility of financial information. Therefore, controlling and preparing financial information have become more than essential.