Governance convergence and accounting harmonization
Faculty of Business and Hong Kong Institute of Business Studies, Lingnan University
10:30 -- 12:00
Online Session via Zoom
Despite the regulatory efforts to promote a harmonized reporting regime, differences in local institutions often lead to heterogeneity in reporting outcomes. Our study focuses on corporate governance-a key institution-and examines whether the convergence of corporate governance increases accounting harmonization. Constructing governance convergence indexes based on both firm-level practices and country-level reforms, we find that the similarity in corporate governance increases the comparability of actual accounting practices. Exploring the underlying mechanism, we find that accounting harmonization is driven by increased contractual demand and reduced stakeholder conflicts associated with a harmonized governance regime. Furthermore, we show that accounting harmonization facilitates the role of governance convergence in increasing financial market integration. Additional analyses suggest that our results are not driven by the adoption of global accounting standards, the strength of corporate governance, or improvement in financial reporting quality. Overall, our findings suggest that governance convergence has a harmonizing effect on accounting practices, which, in turn, facilitates globalization.
Khurana, I. K. (2021, June 10). Governance convergence and accounting harmonization [Video podcast]. Retrieved from https://commons.ln.edu.hk/videos/897/