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1. Introduction
Financial information transparency is a fundamental property of good governance practices. Financial information and corporate governance have been an object of research since the 1960s; recently, researchers have shown an increased interest in studying the relationship between corporate governance and disclosure information. Previous studies have reported that good corporate governance practices are aimed to improve communication policies with stakeholders and, in particular, the shareholders (Girard and Rakotonjanahary, 2005). Studies of Li (2010) show the importance of corporate governance in improving the disclosure of reliable information. However, these rapid changes are having a serious effect on financial information because information transparency is addressed to external users of annual reports; it is then considered as an external governance mechanism which helps protect against the managers’ opportunism. However, these users most often exert external control over the firms. In this regard, corporate governance mechanisms would stand as a means whereby agency conflicts can be monitored, and managers are inspired to behave and act with respect to shareholders’ interests.
In corporate governance literature, the relative importance of financial information has been subject to considerable debate because an effective corporate governance practice should help reduce the managers’ opportunism behavior and reducing information asymmetry. The information disclosure should serve to allow shareholders to control and monitor leaders through reducing information asymmetries. Consequently, information transparency can be considered as a behavioral variable in so far as it constitutes the result of a predetermined choice. Indeed, the entireties of its arguments improve the existences of a causal relation between information transparency and corporate governance effectiveness. In this case, researchers have not treated this causal relationship in much detail. What is not yet clear is the impact of information transparency on corporate governance practices.
This paper attempts to show that information transparency can affect corporate governance effectiveness. The major objective of this study was to investigate the nature of the relation between corporate governance and financial information transparency. So, this paper intends to determine first the relation between corporate governance and voluntary disclosure, second, the relation between corporate governance and earnings management, third, the relation between corporate governance and accounting conservatism and, finally, the relation between corporate governance and earnings timeliness. Our main reason for choosing this topic is the importance of...