Corporate Governance And Financial Reporting Quality In State-owned Enterprises

State-Owned Enterprises(SOEs)have been increasingly important contributors to the national and global economy.Today,the SOEs are credited with 20 percent of the world's investment and trade mostly in important strategic sectors.They contribute about 40 percent of global Gross National Product while employing 5 percent of the global workforce.However,most of corporate governance researchers focus on private businesses.Questions have been raised on whether the private sector governance models can be directly applied and generate positive results to state-owned counterparts which face unique challenges and working conditions.Among the major problems facing SOEs are inefficiency,corruption and lack of transparency and accountability.Focused studies that can contribute towards engaging these glaring issues in SOEs is warranted to add to the existing literature on corporate governance practices and financial reporting quality.This study uses the Zahra and Pearce model to analyze the impact of corporate governance on financial reporting quality of the SOEs guided by agency theory and resource dependency theory.The model assesses corporate governance attributes in terms of composition,characteristics,structures and processes of the boards of directors.Based on this model,the study uses board size,board independence,proportion of academic directors in the board as well as the frequency of board meetings as measures of effectiveness of the board of directors.Furthermore,the audit committees' attributes of size,independence,financial expertise and meetings were included as variables to measure effectiveness of the governance structure related to financial reporting.The quality of financial reporting is measured by operationalization of qualitative characteristics of financial statements proposed by Beest et al in 2009.The study uses five measures of relevance,understandability,faithful representation,comparability and timeliness to determine the quality of the SOEs financial reports.This has far reaching implications as to the decision usefulness of the SOEs and their management's extent of transparency and accountability.A pooled cross-sectional sample of 287 entities was used with 142 and 145 from 2015 and 2018 audited reports of SOEs in Tanzania respectively.The reports were obtained from the country's supreme audit body responsible for the audit of all SOEs.Data on corporate governance was extracted from these reports and other particular company documents two raters were used to gauge the qualitative characteristics of the information contained in the audited reports.After important tests,a multi-stage,multivariate ordinary least squares regression was used to measure the relationships between corporate government attributes and financial reporting quality using industry competition as a moderating variable.The study finds that academic directors presence in the boards,board meetings,audit committees size,independence,financial expertise as well as meetings are all positively related to financial reporting quality of SOEs in Tanzania.Board size and independence were found to be statistically insignificant.It was further determined that the overall financial reporting quality improved between 2015 and 2018.Industry competition moderates the relationships between financial reporting quality and audit committee meetings,audit committees' size,financial expertise and independence only,being insignificant for the other variables.Six of the eight primary hypotheses are significant indicating an important contribution of this study to the debate of corporate governance' impact on financial reporting quality and methodologically,the operationalization of qualitative characteristics to measure quality of financial reports is superior to many others used in SOEs research.Future studies can add to the literature by studying other variable such as internal controls and the role of audit on determining the reporting quality of SOEs.