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Volume :28 Issue : 1 2021      Add To Cart                                                                    Download

Value Relevance of Accounting Measures: Do Board Gender-Diversity and Ownership Structure Matter in Kuwaiti Context?

Auther : Hesham I. Almujamed and Mishari M. Alfraih

Purpose: This study aimed to investigate whether the characteristics of the boards of directors of companies listed on Kuwait Boursa influenced the value relevance of accounting information.
Study design/ methodology/ approach: Family members, women members, members of the royal family, and government ownership of the boards of directors were used as proxies of effective corporate governance on the value relevance of accounting information. Value relevance was derived from regressing stock price on earnings and equity book values using Ohlson’s (1995) valuation model.
Sample and data: The dataset consisted of 121 non-financial firms listed on Kuwait Boursa in 2016.
Results: Regression analysis showed that certain board characteristics of firms listed on the Kuwait Boursa displayed greater value relevance to accounting information. After controlling for firm size and industry category, the results suggested that family ownership resulted in greater value relevance of earnings, but not book value. Kuwaiti firms with more women on boards had significantly lower value relevance for book value. The presence of royal family members on a board and government ownership were negatively correlated with market value.
Originality/ value: This paper extends the previous literature by providing empirical evidence that certain board characteristics increase the value relevance of accounting information.
Research limitations/ implications: This research provides evidence only for a limited set of characteristics; other board aspects and valuation models should be investigated. This study is useful for academics, regulators, managers and other stakeholders. The findings will benefit decision makers by highlighting the importance of female members on Kuwaiti boards in maintaining an effective governance mechanism. Family-owned businesses with family members on the board had greater value relevance for earnings.
 

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