Corporate governance, financial transparency and currency devaluation shocks: evidence from Egypt

Abstract

Purpose: This study aims to investigate the association between corporate governance and financial transparency, using the moderating role of an Egyptian currency devaluation decision as a policy shock. Design/methodology/approach: Data was collected for a sample of companies listed on the Egyptian stock exchange from 2014 to 2019. To control for time-invariant unobserved heterogeneity, the authors analyse panel data using an estimated generalised least squares regression model. Findings: The findings underline the pitfalls of assuming that corporate governance mechanisms are effective regardless of circumstances and support the complementary roles of a number of theories in interpreting the empirical findings. Research limitations/implications: This study is limited to non-financial companies and includes only corporate board and audit committee governance mechanisms. The study results have important implications for policymakers, international lending institutions, investors and accounting standards setters. It is of particular importance to policymakers in other less-developed countries with similar economic conditions. Originality/value: To the best of the authors’ knowledge, this study is the first empirical attempt to provide evidence of the impact of a currency devaluation shock on the relationship between corporate governance and financial transparency within the Egyptian context as an example of a transitional economy. Hence, it provides a significant theoretical and empirical contribution to the literature.