The Informative Value of CG Code Voluntary Disclosure on Firm Performance When Moderated by External Auditors

Abstract

The study aims to empirically examine the voluntary disclosure of the corporate governance code (CG Code) of Thai-listed companies. It also examines the effects of the information value of the CG Code on firm performance and the moderating role of external audit quality in this effect. A disclosure specification comprising 137 voluntary items recommended by the OECD is employed to judgmentally evaluate the CG Code disclosed by the 95 fully implementing firms listed on the Stock Exchange of Thailand. The analysis is performed using multivariate regression techniques along with Hayes’s regression-based analysis and shows that CG Code and audit quality have a statistically significant positive effect on firm performance. In addition, audit quality was found to moderate the positive effect of the CG Code on firm performance, such that the effect of the CG Code on firm performance is strengthened as the quality of audits increases. Specifically, the positive effect of CG Code on firm performance is stronger when the audit quality is at the average value and above, whereas CG Code shows no statistically significant effect on firm performance when audit quality is below average. The paper has contributed to the academic literature that managers should be motivated to voluntarily disclose the CG Code and also engage with high-quality auditors in general and Thailand in particular.