The impact of board processes on monitoring of financial reporting

Submission note: A thesis submitted in total fulfilment of the requirements for the degree of Doctor of Philosophy to the Department of Accounting, Business School, College of Arts, Social Sciences and Commerce, La Trobe University, Bundoora.

This study examines the impact of board processes on monitoring of financial reporting. It provides empirical, methodological and theoretical advancement of the governance literature towards an understanding of a group process-oriented view of board monitoring effectiveness. As hypothesized, in a sample of 184 ASX listed companies, it was found that board effort norms, and use of knowledge and skills, are positively and significantly related to monitoring of financial reporting. It was also revealed that dealing with cognitive conflicts have a curvilinear relationship with monitoring of financial reporting. It was also found that the board processes mediate the association between board structure and monitoring of financial reporting. Combining archival and survey data, this study used a novel approach in opening up the “black box” in corporate governance research around financial reporting. From a theoretical stance, it suggests that the application of agency theory alone does not adequately explain the dynamics of board behaviour around financial reporting issues. Instead, boards need to be viewed from a social-psychological process related to group participation and interaction. The findings provide implications for practitioners regarding the processes that may aid to deploy effective monitoring mechanisms over financial reporting. Existing corporate governance regulations focus on structural solutions. However, the study shows that the board processes are also important for effective monitoring of financial reporting.