An International Meeting of the American Accounting Association American Accounting Association 2006 Annual Meeting August 6–9, 2006 Washington, D.C.

Oliver M. Rui
Chinese University of Hong Kong

Qian Wang
Chinese University of Hong Kong

Danqing Young
Chinese University of Hong Kong

Abstract: This study examines whether governance mechanisms at both the country and firm level affect the perceived credibility of corporate disclosure in an international setting. Building upon prior research, we argue that strong country-specific governance as reflected by extensive shareholder rights and efficient law enforcement, and strong firm-level governance as reflected by dispersed control rights and highly aligned cash flow and voting rights, can reduce the incentives of insiders to make false or misleading disclosures, and this in turn will improve the perceived credibility of corporate disclosure. Using a sample of firms from 30 economies, we find evidence that is generally consistent with our hypothesis.

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