The research investigates the impact of corporate governance mechanisms on financial reporting quality (FRQ) in Egyptian firms. The study sample includes 68 nonfinancial firms obtained from the top 100 most active firms listed in Egyptian stock exchange (EGX). Secondary data was obtained from both the annual reports of Egyptian firms and sourced from Refinitiv Eikon Datastream for a 9-year period from 2014 to 2022. Using random effects multiple regression, findings reflect that not all corporate governance mechanisms significantly affect FRQ in Egyptian firms. Specifically, blockholder ownership and the frequency of board meetings have a significant negative impact on FRQ, while board size and audit committee meeting frequency partially influence FRQ positively. Other mechanisms, such as managerial ownership, board independence, CEO duality, and audit committee size, do not show a significant impact. Control variables such as Age showed a significant positive impact on FRQ. Leverage and ROA partially affect FRQ positively. However, Size showed an insignificant relationship with FRQ.
Cite this paper
Abulazm, H. , Sakr, A. and Hamza, H. (2025). The Impact of Corporate Governance Mechanisms on Financial Reporting Quality: Empirical Evidence from Egyptian Listed Firms. Open Access Library Journal, 12, e2862. doi: http://dx.doi.org/10.4236/oalib.1112862.
Hasan, A., Aly, D. and Hussainey, K. (2022) Corporate Governance and Financial Reporting Quality: A Comparative Study. Corporate Governance: The International Journal of Business in Society, 22, 1308-1326. https://doi.org/10.1108/cg-08-2021-0298
Biddle, G.C., Hilary, G. and Verdi, R.S. (2009) How Does Financial Reporting Quality Relate to Investment Efficiency? Jour-nal of Accounting and Economics, 48, 112-131. https://doi.org/10.1016/j.jacceco.2009.09.001
Cohen, J.R., Krishnamoorthy, G. and Wright, A. (2004) The Corporate Governance Mosaic and Financial Reporting Quality. Journal of Accounting Literature, 23, 87-152.
Sáenz González, J. and García-Meca, E. (2013) Does Corporate Governance Influence Earnings Management in Latin American Markets? Journal of Business Ethics, 121, 419-440. https://doi.org/10.1007/s10551-013-1700-8
Bako, M.A. (2017) The Impact of Corporate Governance on the Quality of Financial Reporting in the Nigerian Chemical and Paint Industry. Research Journal of Finance and Accounting, 9, 35-41.
Attia, E.F., Khémiri, W. and Mehafdi, M. (2023) Does Ownership Structure Reduce Earnings Manipulation Practice of Egyptian Listed Firms? Evidence from a Dynamic Panel Threshold Model. Future Business Journal, 9, Article No. 34. https://doi.org/10.1186/s43093-023-00213-4
Abdou, H., Ellelly, N.N., Elamer, A.A., Hussainey, K. and Yazdifar, H. (2020) Corporate Governance and Earnings Management Nexus: Evidence from the UK and Egypt Using Neural Networks. Inter-national Journal of Finance & Economics, 26, 6281-6311. https://doi.org/10.1002/ijfe.2120
Nasr, M.A. and Ntim, C.G. (2018) Corporate Governance Mechanisms and Accounting Conservatism: Evidence from Egypt. Cor-porate Governance: The International Journal of Business in Society, 18, 386-407. https://doi.org/10.1108/cg-05-2017-0108
Garrett, J., Hoitash, R. and Prawitt, D.F. (2014) Trust and Financial Reporting Quality. Journal of Accounting Re-search, 52, 1087-1125. https://doi.org/10.1111/1475-679x.12063
Martínez-Ferrero, J. (2014) Conse-quences of Financial Reporting Quality on Corporate Performance: Evidence at the In-ternational Level. Estudios de economía, 41, 49-88. https://doi.org/10.4067/s0718-52862014000100002
McMullen, D.A. (1996) Audit Committee Performance: An Investiga-tion of the Consequences Associated with Audit Committees. Auditing: A Journal of Practice & Theory, 15, 87-96.
Aygun, M., Ic, S. and Sayim, M. (2014) The Ef-fects of Corporate Ownership Structure and Board Size on Earnings Management: Ev-idence from Turkey. International Journal of Business and Management, 9, 123-132. https://doi.org/10.5539/ijbm.v9n12p123
Fodio, M.I., Ibikunle, J. and Oba, V.C. (2013) Corporate Governance Mechanisms and Reported Earnings Quality in Listed Nigerian Insurance Firms. International Journal of Finance and Accounting, 2, 279-286.
Sloan, R.G. (2001) Financial Accounting and Corporate Governance: A Discussion. Journal of Accounting and Economics, 32, 335-347. https://doi.org/10.1016/s0165-4101(01)00039-8
Shleifer, A. and Vishny, R.W. (1997) A Survey of Corporate Governance. The Journal of Finance, 52, 737-783. https://doi.org/10.1111/j.1540-6261.1997.tb04820.x
Morck, R., Shleifer, A. and Vishny, R.W. (1988) Management Ownership and Market Valuation. Journal of Fi-nancial Economics, 20, 293-315. https://doi.org/10.1016/0304-405x(88)90048-7
Thomsen, S., Pedersen, T. and Kvist, H.K. (2006) Blockholder Ownership: Effects on Firm Value in Market and Con-trol Based Governance Systems. Journal of Corporate Finance, 12, 246-269. https://doi.org/10.1016/j.jcorpfin.2005.03.001
Yeo, G.H.H., Tan, P.M.S., Ho, K.W. and Chen, S. (2002) Corporate Ownership Structure and the Informativeness of Earnings. Journal of Business Finance & Accounting, 29, 1023-1046. https://doi.org/10.1111/1468-5957.00460
Saona, P., Muro, L. and Alvarado, M. (2020) How Do the Ownership Structure and Board of Directors’ Features Impact Earnings Management? The Spanish Case. Journal of International Financial Man-agement & Accounting, 31, 98-133. https://doi.org/10.1111/jifm.12114
Yasser, Q.R., Mamun, A.A. and Hook, M. (2017) The Impact of Ownership Structure on Fi-nancial Reporting Quality in the East. International Journal of Organizational Analysis, 25, 178-197. https://doi.org/10.1108/ijoa-08-2015-0894
Klai, N. and Omri, A. (2010) Corporate Governance and Financial Reporting Quality: The Case of the Tuni-sian Firms. International Business Research, 4, 158-166. https://doi.org/10.5539/ibr.v4n1p158
Cumming, D., Leung, T.Y. and Rui, O. (2015) Gender Diversity and Securities Fraud. Academy of Management Journal, 58, 1572-1593. https://doi.org/10.5465/amj.2013.0750
Jensen, M.C. (1993) The Modern Industrial Revolution, Exit, and the Failure of Internal Control Systems. The Journal of Finance, 48, 831-880. https://doi.org/10.1111/j.1540-6261.1993.tb04022.x
Yermack, D. (1996) Higher Market Valuation of Companies with a Small Board of Directors. Journal of Financial Economics, 40, 185-211. https://doi.org/10.1016/0304-405x(95)00844-5
Peasnell, K.V., Pope, P.F. and Young, S. (2005) Board Monitoring and Earnings Management: Do Outside Directors Influence Abnormal Accruals? Journal of Business Finance & Accounting, 32, 1311-1346. https://doi.org/10.1111/j.0306-686x.2005.00630.x
Dobija, D., Hryckiewicz, A., Zaman, M. and Puławska, K. (2022) Critical Mass and Voice: Board Gender Diversity and Financial Reporting Quality. European Management Journal, 40, 29-44. https://doi.org/10.1016/j.emj.2021.02.005
Geraldes Alves, S.M. (2011) The Effect of the Board Structure on Earnings Management: Evidence from Portugal. Journal of Financial Reporting and Accounting, 9, 141-160. https://doi.org/10.1108/19852511111173103
Miko, N. and Kamardin, H. (2015) Corporate Governance and Financial Reporting Quality in Nigeria: Evidence from Pre- and Post-Code 2011. International Journal of Emerging Science and Engineering, 4, 1-7.
Habbash, M. (2012) The Role of Corporate Governance Mechanisms in Constraining Earnings Management Practice in Saudi Arabia. Saudi Accounting Asso-ciation, 11, 83-84.
Gul, F.A. and Leung, S. (2004) Board Leadership, Outside Directors’ Expertise and Voluntary Corporate Disclosures. Journal of Accounting and Public Policy, 23, 351-379. https://doi.org/10.1016/j.jaccpubpol.2004.07.001
Vafeas, N. (1999) Board Meet-ing Frequency and Firm Performance. Journal of Financial Economics, 53, 113-142. https://doi.org/10.1016/s0304-405x(99)00018-5
Terjesen, S., Couto, E.B. and Francisco, P.M. (2015) Does the Presence of Independent and Female Directors Impact Firm Performance? A Multi-Country Study of Board Diversity. Journal of Manage-ment & Governance, 20, 447-483. https://doi.org/10.1007/s10997-014-9307-8
Wahid, A.S. (2018) The Effects and the Mechanisms of Board Gender Diversity: Evidence from Financial Manipulation. Journal of Business Ethics, 159, 705-725. https://doi.org/10.1007/s10551-018-3785-6
Smith, N., Smith, V. and Verner, M. (2006) Do Women in Top Management Affect Firm Performance? A Panel Study of 2,500 Danish Firms. International Journal of Productivity and Performance Manage-ment, 55, 569-593. https://doi.org/10.1108/17410400610702160
Di Vito, J. and Trottier, K. (2021) A Literature Review on Corporate Governance Mechanisms: Past, Present, and Future. Accounting Perspectives, 21, 207-235. https://doi.org/10.1111/1911-3838.12279
Wijethilake, C. and Ekanayake, A. (2019) CEO Duality and Firm Performance: The Moderating Roles of CEO Informal Power and Board Involvements. Social Responsibility Journal, 16, 1453-1474. https://doi.org/10.1108/srj-12-2018-0321
Salehi, M., Mahmoudabadi, M., Adib-ian, M.S. and Rezaei Ranjbar, H. (2020) The Potential Impact of Managerial Entrench-ment on Firms’ Corporate Social Responsibility Activities and Financial Performance: Evidence from Iran. International Journal of Productivity and Performance Manage-ment, 70, 1793-1815. https://doi.org/10.1108/ijppm-06-2019-0259
Peng, M.W., Zhang, S. and Li, X. (2007) CEO Duality and Firm Performance during China’s Insti-tutional Transitions. Management and Organization Review, 3, 205-225. https://doi.org/10.1111/j.1740-8784.2007.00069.x
Alves, S. (2021) CEO Duality, Earnings Quality and Board Independence. Journal of Financial Reporting and Ac-counting, 21, 217-231. https://doi.org/10.1108/jfra-07-2020-0191
Sharawi, H. (2023) The Impact of CEO Attributes on Financial Reporting Quality in Egypt: The Moderating Role of Board Ownership. Journal of Accounting Research, 4, 40-73.
Al-Rassas, A.H. and Kamardin, H. (2016) Earnings Quality and Audit Attributes in High Concentrated Ownership Market. Corporate Governance, 16, 377-399. https://doi.org/10.1108/cg-08-2015-0110
Turley, S. and Zaman, M. (2004) The Corporate Governance Effects of Audit Committees. Journal of Man-agement and Governance, 8, 305-332. https://doi.org/10.1007/s10997-004-1110-5
Mardessi, S. (2021) Audit Committee and Financial Reporting Quality: The Moderating Effect of Audit Quality. Journal of Financial Crime, 29, 368-388. https://doi.org/10.1108/jfc-01-2021-0010
Habbash, M. and Alagla, S. (2015) Audit Committee Effectiveness and Evidence from Saudi Arabia. Journal of Adminis-trative and Economic Science, 8, 41-60.
Xie, B., Davidson, W.N. and DaDalt, P.J. (2003) Earnings Management and Corporate Governance: The Role of the Board and the Audit Committee. Journal of Corporate Finance, 9, 295-316. https://doi.org/10.1016/s0929-1199(02)00006-8
Shankaraiah, K. and Sajjadian Amiri, S.M. (2017) Audit Committee Quality and Financial Reporting Quality: A Study of Selected Indian Companies. Jurnal Dinamika Akuntansi dan Bisnis, 4, 1-18. https://doi.org/10.24815/jdab.v4i1.6653
Dechow, P., Ge, W. and Schrand, C. (2010) Understanding Earnings Quality: A Review of the Proxies, Their Determinants and Their Consequences. Journal of Accounting and Economics, 50, 344-401. https://doi.org/10.1016/j.jacceco.2010.09.001
Usman, S.H. (2013) Financial Re-porting Quality, Does Monitoring Characteristics Matter? An Empirical Analysis of Nigerian Manufacturing Sector. The Business and Management Review, 3, 148-161.
Healy, P.M. and Wahlen, J.M. (1999) A Review of the Earnings Man-agement Literature and Its Implications for Standard Setting. Accounting Horizons, 13, 365-383. https://doi.org/10.2308/acch.1999.13.4.365
Jones, K.L., Krishnan, G.V. and Melendrez, K.D. (2008) Do Models of Discretionary Accruals Detect Actual Cases of Fraudulent and Restated Earnings? An Empirical Analysis. Contemporary Accounting Research, 25, 499-531. https://doi.org/10.1506/car.25.2.8
Klein, A. (2002) Audit Committee, Board of Director Characteristics, and Earnings Management. Journal of Accounting and Economics, 33, 375-400. https://doi.org/10.1016/s0165-4101(02)00059-9
Basu, S. (1997) The Conserva-tism Principle and the Asymmetric Timeliness of Earnings1. Journal of Accounting and Economics, 24, 3-37. https://doi.org/10.1016/s0165-4101(97)00014-1
Mesabah, S.H. and Ramadan, M.M. (2022) The Effect of Audit Quality on Financial Reporting Quality. Alexandria Journal of Accounting Research, 6, 41-84.
Givoly, D. and Hayn, C. (2000) The Changing Time-Series Properties of Earnings, Cash Flows and Accruals: Has Financial Reporting Become More Conservative? Journal of Accounting and Economics, 29, 287-320. https://doi.org/10.1016/s0165-4101(00)00024-0
Ahmed, A.S. and Duellman, S. (2007) Accounting Conservatism and Board of Director Characteristics: An Empirical Analysis. Journal of Accounting and Economics, 43, 411-437. https://doi.org/10.1016/j.jacceco.2007.01.005
Soliman, M.M. (2014) Auditing Quality Characteristics and Accounting Conservatism: An Empirical Study of the Listed Companies in Egypt. Corporate Ownership and Control, 11, 352-361. https://doi.org/10.22495/cocv11i2c3p4
Irshoud, J. (2022) The Corporate Gov-ernance and Its Application’s Compliance Level Implication on the Financial Perfor-mance of Listed Firms in the Amman Stock Exchange. Doctoral Thesis, University of Wales Trinity Saint David.
Rad, S.A. (2014) The Relationship between Corporate Governance Practices and Cost of Capital in Large Listed Companies of New Zealand and Singapore. Doctoral Thesis, The University of Waikato.
Nguyen, A.H., Nguyen, L.H. and Doan, D.T. (2020) Ownership Structure and Earnings Management: Empirical Evidence from Vietnam Real Estate Sector. Real Estate Management and Valuation, 28, 37-51. https://doi.org/10.1515/remav-2020-0014
Abdel Megeid, N.S. (2021) The Effect of Ownership Structure, Board Size and Firm Value on Corpo-rate Financial Leverage and Dividends Policy: An Applied Study. Accounting Thought, 25, 162-201.
Almalki, B. (2023) The Effect of Corporate Governance Mecha-nisms on Earnings Management Practices in Saudi Listed Companies. PhD Thesis, University of Glasgow.
Alkurdi, A., Al-Nimer, M. and Dabaghia, M. (2017) Accounting Conservatism and Ownership Structure Effect: A Look at Industrial and Financial Jordanian Listed Companies. Journal of Environmental Accounting and Management, 5, 153-169. https://doi.org/10.5890/jeam.2017.06.007
Abbadi, S., Hijazi, Q. and Al-Rahahleh, A. (2016) Corporate Governance Quality and Earnings Management: Evidence from Jordan. Australasian Accounting, Business and Finance Journal, 10, 54-75. https://doi.org/10.14453/aabfj.v10i2.4
Abdou, H.A., Ellelly, N.N., Elamer, A.A., Hussainey, K. and Yazdifar, H. (2020) Corporate Governance and Earnings Management Nexus: Evidence from the UK and Egypt Using Neural Net-works. International Journal of Finance & Economics, 26, 6281-6311. https://doi.org/10.1002/ijfe.2120
Abdallah Mohammad Qadorah, A. (2018) The Effect of Board Independence and Board Meeting on Firm Performance: Evidence from Jordan. Journal of Finance and Accounting, 6, 105-109. https://doi.org/10.11648/j.jfa.20180605.11
Elfeky, M.I.A. and Abdelaziz, H.A.E. (2022) The Impact of Corporate Governance Structure on Corporate Social Responsi-bility: An Applied Study on Egyptian Companies. Scientific Journal of Financial and Commercial Studies and Research, 3, 363-418.
Krismiaji, (2021) Audit Quality Character-istics and Accounting Conservatism: Empirical Study in Indonesian Company. Atestasi: Jurnal Ilmiah Akuntansi, 4, 132-141. https://doi.org/10.57178/atestasi.v4i2.42
Ruch, G.W. and Taylor, G.K. (2014) The Effects of Accounting Conservatism on Financial Statements and Financial State-ment Users: A Review of the Literature. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.1931732
Abdelsalam, O., El‐Masry, A. and Elseg-ini, S. (2008) Board Composition, Ownership Structure and Dividend Policies in an Emerging Market. Managerial Finance, 34, 953-964. https://doi.org/10.1108/03074350810915879
Abdul Rahman, R. and Haneem Mohamed Ali, F. (2006) Board, Audit Committee, Culture and Earnings Management: Malaysian Evidence. Managerial Auditing Journal, 21, 783-804. https://doi.org/10.1108/02686900610680549
Anis, M., Chizema, A., Lui, X. and Fakhreldin, H. (2017) The Impact of Ownership Structure on Firms Financial Perfor-mance—Evidence from Egyptian Listed Companies. Global Journal of Human-Social Science Research, 17, 29-56.
Fernández-Temprano, M.A. and Tejerina-Gaite, F. (2020) Types of Director, Board Diversity and Firm Performance. Corporate Govern-ance: The International Journal of Business in Society, 20, 324-342. https://doi.org/10.1108/cg-03-2019-0096
Davidson, R., Goodwin-Stewart, J. and Kent, P. (2005) Internal Governance Structures and Earnings Management. Accounting and Finance, 45, 241-267. https://doi.org/10.1111/j.1467-629x.2004.00132.x
Bouaziz, D., Salhi, B. and Jarboui, A. (2020) CEO Characteristics and Earnings Management: Empirical Evidence from France. Journal of Financial Reporting and Accounting, 18, 77-110. https://doi.org/10.1108/jfra-01-2019-0008
Khlif, H., Samaha, K. and Azzam, I. (2015) Disclosure, Ownership Structure, Earnings Announcement Lag and Cost of Eq-uity Capital in Emerging Markets. Journal of Applied Accounting Research, 16, 28-57. https://doi.org/10.1108/jaar-06-2012-0046
Abd-Elnaby, H., Abd-Elkareem, K. and Adel, H. (2021) The Impact of Financial Reporting Quality on Firm’s Financial Performance: Evidence from Egypt. International Journal of Academic Research in Accounting, Finance and Management Sciences, 11, 529-545. https://doi.org/10.6007/ijarafms/v11-i1/7510
Al-Haddad, L. and Whittington, M. (2019) The Impact of Corporate Governance Mechanisms on Real and Accrual Earn-ings Management Practices: Evidence from Jordan. Corporate Governance: The In-ternational Journal of Business in Society, 19, 1167-1186. https://doi.org/10.1108/cg-05-2018-0183
De Sousa, E.F. and Galdi, F.C. (2016) The Relationship between Equity Ownership Concentration and Earnings Quality: Evi-dence from Brazil. Revista de Administração, 51, 331-343. https://doi.org/10.1016/j.rausp.2016.07.006
Alves, S. (2020) Ownership Struc-ture and Accounting Conservatism: Evidence from Portuguese and Spanish Listed Companies. Academy of Accounting and Financial Studies Journal, 24, 1-21.
Boussaid, N., Hamza, T. and Sougne, D. (2015) Corporate Board Attrib-utes and Conditional Accounting Conservatism: Evidence from French Firms. Journal of Applied Business Research (JABR), 31, 871-890. https://doi.org/10.19030/jabr.v31i3.9224
Hamdan, A.M.M. (2018) The Impact of Audit Committee Characteristics on Accounting Conservatism: Additional Evidence from Jordan. International Business Research, 11, 138-151.
Almaleeh, N.M.S. (2022) Audit Committee Characteristics and Accounting Conservatism: An Empirical Investigation. Scientific Journal for Financial and Commercial Studies and Research, Faculty of Commerce, Damietta University, 3, 1-33.
