Does the Improvement of Board Committee Enhance the Quality of Accounting Information?

This study examines the impact of board committee on the quality of accounting information. It uses a sample of 1950 firm-year companies during the period from 2000-2004. The Asian financial crisis at the end of the 20th century has brought a wide range of reforms in areas of corporate governance in Korea. The major purpose of the improvement of corporate governance structures was to enhance the overall quality of accounting information. In this paper, we investigate whether the improved board committee which is one of major corporate governance has really enhanced the quality of accounting information. The results of this study are summarized as follows: First, in aspect of the relevance of accounting information, the improved board committee appears to enhance the value of the firm, especially that of earnings. Then, a firm with an improved board committee is related to discretionary accruals. It allows a firm with an improved board to appear to exercise less discretion in accounting numbers. Finally, a firm with an improved board committee, seems to be more conservative. In short, the empirical results show that, on average, the improved board committee is associated with the higher quality of accounting information.