Corporate Governance Mechanisms and Financial Reporting Quality: Evidence from Saudi Arabia

Abstract

This research seeks to explore how corporate governance affects financial reporting quality through board independence, audit committee effectiveness, and transparency. A quantitative research method was used, whereby a structured questionnaire was issued to 295 respondents including accountants, auditors, and scholars. Various analysis methods used include descriptive statistics, Pearson correlation, and multiple regression via the SPSS software package. Descriptive analysis shows relatively high means among the three governance indicators, where the means are relatively high in all the four indicators (means > 4.00). In addition, positive correlation was found between each governance indicator and financial reporting quality with the highest correlation coefficient being between board independence and financial reporting quality (r = 0.706). Multiple regression analysis showed that the model created has relatively high predictive capacity (R² = 0.591), meaning that 59.1% of the variation in financial reporting quality can be explained by the model. Audit committee effectiveness had the highest beta coefficient (? = 0.304).   Keywords: Corporate Governance, Financial Reporting Quality, Audit Committee, Board Independence, Transparency.