MARCO TEÓRICO
2.1 DESARROLLO DE LA COMUNICACIÓN EFICAZ
2.1.10 La comunicación educativa
Several theories have been used in the literature of corporate governance. What is important is to know when a certain theory should be used and whether it needs to be complemented with any other theory. Lynall et al. (2003) theorize that what matters, rather than choosing one of the theoretical approaches over another, is the applicability of each of the approaches given the phenomena of interest.
As far as this study is concerned, there are four main theoretical frameworks which have been used in the relevant literature: agency, stakeholder, resource dependence, and institutional. This is in addition to a multi-theoretical approach which has been lately introduced to capture the wider complexities in organizations. The agency theory has been the main theory applied in corporate governance research (Beattie et al. 2012), because its “model leads to a higher degree of mathematical tractability than do the competing theoretical perspectives” (Cohen et al. 2008, p.188).
Unlike agency theory which suggests that all of a manager’s decisions must align with the sole objective of the firm of maximizing shareholders wealth, the stakeholder theory presumes the alignment of managers’ decisions with all the interests of different stakeholder groups. In other words, the stakeholder perspective suggests that managers act as fiduciaries for “the interests of all of a firm’s stakeholders” trying to address them equally (Marcoux 2003, p.2). However, the stakeholder theory is unable to achieve this objective of balancing the benefits of all
48
its stakeholders because different stakeholders have different interests by which what benefits a certain group may harm the other (Sternberg 1999). For instance, increasing the benefits for employees through higher salaries may harm customers who will be paying higher prices. As such this theory provides no guidance on how to balance conflicting interests and which benefits are to be preferred (Sternberg 1999). Moreover, it is considered an unrealistic approach, as it does not set a single- valued objective for managers to attain and leaves for the latter the freedom “to exercise their own preferences in spending the firm’s resources” (Jensen 2002, p.237). Finally, the stakeholder theory does not account for the possibility of opportunistic behaviours by managers who may “use stakeholder claims as a smokescreen to obscure what is really their inability to deliver value to the company’s shareholders” (Healy 2003, p.24).
Similar to the stakeholder theory, resource dependence theory also does not account for the possibility of managerial opportunistic behaviours to mislead shareholders. However, it is narrowly focused on the boundary spanner role of the board of directors who provide management with timely information to enhance performance. Moreover, resource dependence theorists have been subject to criticism that they have mainly emphasized how the board of directors could facilitate “the provision of resources to the firm” without taking into account the incentives of the directors themselves (Hillman and Dalziel 2003, p.384).
In the same vein, the institutional theory does not account for the self-serving behaviour of managers and their deliberate intentions of hiding the real performance of the firm. It rather deals with the social and political factors that may affect the organization within its institutional context. Neither is the relationship between management and the external auditors delineated by these factors, nor are the
49
discretionary actions of management constrained by the systematic behaviour of organizations.
Recently, a limited number of studies have suggested a multi-theoretical approach. More research is needed in this area to provide a clear view of the interrelationships of theories and how they might complement each other. The proposed integrative models are simplified and might not be applicable in real life situations where “there might well be complexities that could prevent a clear alignment of the complementary effects” (Christopher 2010, p.693).
This study mainly draws on agency theory to address the research questions and test whether an association exists between corporate governance mechanisms on the one hand and financial reporting quality and auditor remuneration on the other. In contrast to all alternative theories, the agency theory provides better justification of managers’ incentives to manage earnings and better explanation of the relationship between auditors and their clients. Figure 2.1 illustrates the agency perspective of the oversight role of the board and the audit committee which is adopted in this study. Earnings management is considered an agency cost. Given the concerns raised about misleading revenue recognition practices during the sample period of this study, earnings are considered to be managed opportunistically to hide poor performance and prevent shareholders from making informed decisions. As such, vigilant oversight from the board of directors in general and the audit committee in particular will enhance the integrity of financial statements, ensure reliable financial reporting judgements and proper revenue recognition and disclosure, and in turn reduce agency costs. On the other hand, simultaneous provision of audit services and non-audit services is more likely to cause moral hazard agency conflicts (Quick et al. 2013), and impair the objectivity and
50
independence of the external auditors. An attentive oversight from the board and the audit committee is also expected to reduce agency conflicts through monitoring the effectiveness of the audit process while taking into account the provision of non- audit services by the audit firm and its impact on auditors’ independence.
51
Figure 2.1: An Agency Perspective of the Oversight Roles of Internal
Governance Mechanisms
Internal governance
mechanisms
-
Audit committee
-
Board of directors
Oversight
Financial reporting
process
- Integrity of financial statements - Financial reporting judgments - Revenue recognition criteria and disclosureExternal audit
process
- Objectivity & independence - Simultaneous provision of audit services & non- audit services - Remuneration & terms of engagementReduce
- Agency costs - Agency conflicts - Information asymmetryOutcomes
- Transparent financial reporting- Objective audit process - High audit quality
52