English, Article, Journal or magazine article edition: The Dark Side of Good Corporate Governance: Mariano Selvaggi; Thomas Kirchmaier

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Bookmark: http://trove.nla.gov.au/version/45420
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • The Dark Side of Good Corporate Governance:
Author
  • Mariano Selvaggi
  • Thomas Kirchmaier
Physical Description
  • preprint
Notes
  • We argue on theoretical grounds that obligatory compliance with stricter financial reporting rules (e.g. the US Sabanes-Oxley Act) may entail important unintended consequences. Paradoxically, the amount of misreporting may increase because corporate boards spend more valuable resources fulfilling statutory mandates rather than involving themselves in forward-looking strategy setting, As these surveillance devices are substitute methods of gauging management quality, when boards focus on the firm's internal control and accounting system they become semi-detached from strategy - their business acumen falters. Top executives are then judged primarily on the basis of financial metrics as opposed to long-term fit. Since the balance sheet review carries more weight in the board's decision-making process, the return to managerial book-cooking (a purely ¶influence¶ activity) and the risk of endorsing flawed business plans swell. This confirms a burgeoning sentiment among business leaders and scholars that boards should perhaps pay less rather than more heed to codified, verifiable 'good ' governance principles.JEL classification: D23, G30, K20, M21, M40.Keywords: Corporate  Governance, Earnings Manipulation, Auditing, Misreporting, Sarbanes-Oxley Act, Combined Code on Corporate Governance
  • RePEc:fmg:fmgdps:dp559
Language
  • English
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