Skip to main content

Research Repository

Advanced Search

Corporate governance quality and premature revenue recognition: evidence from the UK

Okaily, J.A.; Dixon, R.; Salama, A.

Corporate governance quality and premature revenue recognition: evidence from the UK Thumbnail


Authors

J.A. Okaily

A. Salama



Abstract

Purpose Since 2005, wide-ranging concerns have been raised about misleading revenue recognition practices, especially during and after the 2008–2009 global financial crisis. There is a lack of research into the relationship between corporate governance (CG) mechanisms and premature revenue recognition (PRR). The paper aims to discuss these issues. Design/methodology/approach This paper uses a generalised least squares regression analysis of a sample of 854 FTSE 350 firm–year observations. Stubben (2010) discretionary revenue (DR) model is used to measure PRR as it is considered less biased, better specified and more likely to reduce measurement error than accrual models. Findings The results suggest that the size of audit committees plays an effective role in constraining PRR. Moreover, PRR is more likely to be curbed in the presence of small boards comprising a higher proportion of non-executive directors. Additional tests reveal that the relationship between board size and PRR is non-linear. Research limitations/implications The findings address the concerns of corporate firms, capital providers, UK regulators and standard-setters regarding misleading revenue recognition practices and should be considered while setting new governance reform recommendations in response to changing economic conditions. Originality/value This is the first study that adopts the DR model of Stubben (2010) to capture PRR and examines its association with CG internal mechanisms. Moreover, the paper considers an important time period – from 2005 to 2013 – in which many significant developments took place.

Citation

Okaily, J., Dixon, R., & Salama, A. (2019). Corporate governance quality and premature revenue recognition: evidence from the UK. International Journal of Managerial Finance, 15(1), 79-99. https://doi.org/10.1108/ijmf-02-2018-0047

Journal Article Type Article
Acceptance Date May 11, 2018
Online Publication Date Apr 2, 2019
Publication Date Apr 2, 2019
Deposit Date Jun 7, 2019
Publicly Available Date Mar 29, 2024
Journal International Journal of Managerial Finance
Print ISSN 1743-9132
Publisher Emerald
Peer Reviewed Peer Reviewed
Volume 15
Issue 1
Pages 79-99
DOI https://doi.org/10.1108/ijmf-02-2018-0047
Public URL https://durham-repository.worktribe.com/output/1300159

Files

Accepted Journal Article (416 Kb)
PDF

Copyright Statement
This article is © Emerald Group Publishing and permission has been granted for this version to appear here https://doi.org/10.1108/IJMF-02-2018-0047. Emerald does not grant permission for this article to be further copied/distributed or hosted elsewhere without the express permission from Emerald Group Publishing Limited.




You might also like



Downloadable Citations