Accounting quality control and firm growth: an empirical investigation of corporate governance awarded firms in Thailand.

Author:Hongsombud, Ar-porn

    Today's trends of global marketplace have economic freedom and globalization. The business environment is fast changes; corporations face increasingly competitive either domestic or foreign all resulted in the expansion of the capitalism of global economy (Apfelthaler et al., 2002). The investors have alternatives in diversify investment businesses that provide higher returns. Therefore, to maintain competitive advantage, many organizations are striving constantly to increase their effectiveness and efficiency (Huang and Chen, 2009). However, during the past decade, most countries worldwide including Thailand have confronted with problems in administration operation, transparency, honesty, responsibility and ethics of management. For example, accounting scandal and fraud have reduced credibility in corporate financial information. These accounting scandals occurred in large companies (e.g. WorldCom and Enron) and in the banking sector (BCCI, Barings, Allied Irish Bank, Baninter and Imarbank). The problems happen from creative accounting practices that have fraud manipulation or deceit about financial information (Omurgonulsen and Omurgonulsen, 2009). Financial crisis has had a dramatic impact on companies around the world, (Vichitsarawong, 2010). The key issue is the financial information practices by companies that require high-quality of financial information (Jones, 2005).

    Interestingly, internal and external stakeholders force business to perform greater financial reporting (Ballou et al., 2006). Accordingly, Bowen et al. (1995) conclude that stakeholder force influences management accounting practice to implement of financial reporting information in decision making. Consequently, stakeholders force has been increasing in significant motivation for accounting quality control in organizations. This leads to concerns that managers tend to do better financial reporting; because investors react to financial reporting quality. These financial reporting are used for the economic decisions of all stakeholders. Moreover, after the financial crisis, these organizations have tried to stabilize their financial systems by improving regulations and stronger regulatory controls (Vichitsarawong, 2010) to enhance financial reporting practices and to respond to the economic fluctuations. Likewise, Sutthachai and Cooke (2009) claimed that new laws and regulations are adjusted for better financial reporting practice in order to respond to economic fluctuations. As a consequence, the organization must resort to management in order to enhance financial reporting efficiency because financial reporting allows users of to understand the financial performance of more organization.

    The literature review shows the quality control of the use of procedure and activities of accounting practices in order to sustain, and improve quality of financial information (Besterfield, 2001). It is generally believed that an accounting quality control helps firms ensure the reliability of financial statements and compliance with strict laws and regulations. Moreover, accounting quality control potentially increase a firm's monitoring and reporting processes, as well as ensuring in compliance with laws and regulations. Therefore, to be able achieve to goals of financial reporting efficiency the approach of the implementation in accounting quality control, is new challenges must be set on company management leading to an awareness of the necessity and importance of information in insuring the survival performance and firm growth.

    This research, accounting quality control is related with the ability in checking to find significant errors in financial statements. Accounting quality control is particularly important to ability of accountants in examining errors in financial statements that can present reporting accurate and appropriate to the users of financial statements. In addition, the accounting quality control is underpinned by a governance structure, which includes accounting structures that have the potential with the objective of long-term interests of stakeholders. Furthermore, from the existing literature, there are a few empirical researches on accounting quality control in the context of Thailand. Moreover, little has been empirically examined regarding the dimensions and the relationships of accounting quality control in the literature. Therefore, this research provides clarification of the new dimensions, measurement and conceptual model for accounting quality control. Not only does it propose the new empirical investigation, but it also suggests the relationships among dimensions of accounting quality control, antecedents, consequences, and moderator also. To clearly verify the aforementioned relationships, corporate governance awarded firms in Thailand are the population of the study because it is related to management efficiency, transparency, accountability and confidence of shareholders, investors and stakeholders.

    Accordingly, the key purpose of this research is to examine the relationships among accounting quality control and firm growth. In addition, the research questions are as follows: 1) how does each dimension of accounting quality control influence financial reporting efficiency, financial information transparency, and financial information value?, 2) how does financial reporting efficiency influence financial information transparency and financial information value?, 3) how do financial reporting efficiency, financial information transparency, and financial information value influence continuous stakeholder participation and concrete decision making efficiency?, 4) how does continuous stakeholder participation influence concrete decision making efficiency and firm growth?, 5) how does concrete decision making efficiency influence firm growth?, 6) how do executive accounting vision, accounting experience utilization, accounting learning, accounting regulation change, and stakeholder force influence each dimension of accounting quality control?, 8) how does corporate governance culture moderate executive accounting vision, accounting experience utilization, accounting learning, accounting regulation change, and stakeholder force--each dimension of accounting quality control relationships?, 9) how does accountant adaptation competency moderate each dimension of accounting quality control-financial reporting efficiency, financial information transparency, financial information value relationships?, and 10) how does corporate-stakeholder relationship moderate financial reporting efficiency, financial information transparency, and financial information value- continuous stakeholder participation relationships and concrete decision making efficiency?.

    This study is organized as follows. The first part provides theoretical foundation. The literature reviews and hypothesis development shows in the second. The third provides research methods including, sample selection and data collection procedure, the variable measurements of each construct, the instrument verification, the statistics, and equations to test the hypotheses are provided. The fourth provides the results and discussion. The fifth provides both theoretical and managerial implication. The sixth provides limitations and suggestions for future research. Finally, the last provides contributions, limitations and conclusion.


    The review shows that many theories try to explain why some companies adopt accounting quality control concept. This research implements two mains theories to define the meaning of accounting quality control which are stakeholder and contingency theories. In addition, cognitive learning theory is included to clearly explain the associations between accounting quality control, its antecedents, and consequences.

    2.1 Stakeholder Theory

    Stakeholder theory has developed to respectively continual since 1970. Freeman (1984) was the first scholar present stakeholder model by demonstrates accountability to diverse group of stakeholders. Moreover, the role responsibilities to employees, societies, environment and communities as well as our shareholder have been discussed. However, this theory is based on a large company, actions of the company may not be the only shareholders, but it has a broad impact on many people. Thus, a stakeholder is any group or individual who can be an effect or is affected by the achievement of the organization objectives (Freeman, 1984:46).

    In this research, the stakeholder theory that involves accounting quality control which may be classified into three streams of research. First, some studies emphasize on the role of external stakeholders in assessing the performance of the firms (Ilinitch et al., 1998). Second, other works focus on the importance of stakeholder force (Fineman and Clarke, 1996) on practices of information and financial reporting in firms. Third, some works identify the relevant continuous stakeholder participation in firms. In addition, this view not only focuses on responsibilities but also focuses on policies of the organization about creating a good view to all stakeholders by focusing on the policy of accounting quality control. That is, accounting quality control allows the stakeholders to accept and trust on the organization. Thus, stakeholder theory is applied to explain those accounting quality control constructs linked to greater firm growth.

    2.2 Contingency Theory

    Contingency theory is a concept of management whether executive will practice depends on a certain situation. Fiedler (1967) who proposed the concept of situational management theory or contingency theory claims that there is no best way, but situation will be a determinant to make decisions and appropriate management model. In general, the optimal action is contingent based on the internal and external situation. That is, the best way to manage in any firms depends on the nature of the...

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