The Impact of Corporate Governance Mechanisms on Value Relevance of Accounting Information: Evidence from Jordanian

Abstract

This paper seeks to examine the relationship between corporate governance and the value-relevance of accounting information in Jordan. This paper uses board, audit committee related variables to proxy for corporate governance. Value-relevance is measured by the adjusted R 2 derived from a regression of stock price on earnings and equity book values following Olson’s accounting-based valuation framework. This study used the multiple regression model. The study sample included the banking sector in Jordan, where the study period was from 2009 to 2016 The results of this study showed that there is a statistical relation between( the book value of the ordinary share, the audit committee, the board of directors' independence, and the size of the board of directors)and value relevance of accounting information. There was no statistical significance between (earnings per share, independence of the audit committee) and value relevance of accounting information. The results of the study showed that the independent variables (book value of ordinary shares, audit committee, board independence, size of the board of directors) were able to explain (81.8%) of changes in the dependent variable (the value relevance of accounting information). the variable (book value per ordinary share) alone could account for (73.8%) of the changes in the dependent variable (value relevance of accounting information), While the rest of the variables were able to interpret (8.0%) changes in the variable (the value relevance of accounting information). Overall, this study found a positive influence of corporate governance mechanisms on value relevance of accounting information for the entire firm in Bank sector in Amman Stock Exchange. Thus, it is recommended that further research be undertaken from different aspects, Different sectors and time periods.

Keywords: value relevance, corporate governance, accounting information