How Does the Financial Report Quality Moderate the Nexus between Corporate Governance and Firm Performance During COVID-19: Evidence from the United States Tourism Industry

Jingjing Zheng; Aiwei He; Xinyan Weng

doi:10.6981/FEM.202504_6(4).0003

Authors

Jingjing Zheng
Aiwei He
Xinyan Weng

DOI:

https://doi.org/10.6981/FEM.202504_6(4).0003

Keywords:

Financial Reporting Quality; Tourism Management; Corporate Governance.

Abstract

This study examines the impact of corporate governance on firm performance using a Difference-in-Differences (DID) approach, distinguishing firms based on their governance practices before and after the COVID-19 pandemic. Our findings reveal that firms with stronger governance standards exhibit superior financial performance in the post-pandemic period compared to those with weaker governance structures. Additionally, we investigate the moderating role of financial report quality (FRQ) in this relationship. Results indicate that high-quality financial reporting amplifies the positive effect of corporate governance on firm performance, underscoring the critical role of transparency and disclosure in enhancing governance effectiveness during economic crises. Robustness tests, including placebo analyses and propensity score matching, confirm the reliability of our findings. These insights contribute to the corporate governance literature by demonstrating how governance mechanisms and financial reporting quality jointly influence firm resilience in times of economic uncertainty.

Downloads

Download data is not yet available.

References

[1] Bakar, N. A., & Rosbi, S. (2020). Effect of Coronavirus disease (COVID-19) to tourism industry. International Journal of Advanced Engineering Research and Science, 7(4), 189-193.

[2] Berg, K. A., & Mark, N. C. (2019). Where’s the risk? The forward premium bias, the carry-trade premium, and risk-reversals in general equilibrium. Journal of International Money and Finance, 95, 297-316.

[3] Bhagat, S., & Bolton, B. (2019). Corporate governance and firm performance: The sequel. Journal of Corporate Finance, 58, 142-168.

[4] Billi, M., Mascareño, A., & Edwards, J. (2021). Governing sustainability or sustainable governance? Semantic constellations on the sustainability-governance intersection in academic literature. Journal of cleaner production, 279, 123523.

[5] Chen, J. J., & Zhang, H. (2010). The impact of regulatory enforcement and audit upon IFRS compliance–Evidence from China. European Accounting Review, 19(4), 665-692.

[6] Citterio, A., & King, T. (2023). The role of Environmental, Social, and Governance (ESG) in predicting bank financial distress. Finance Research Letters, 51, 103411.

[7] Cohen, J. R., Krishnamoorthy, G., & Wright, A. (2004). The corporate governance mosaic and financial reporting quality. Journal of accounting literature, 87-152.

[8] Collins-Kreiner, N., & Ram, Y. (2021). National tourism strategies during the Covid-19 pandemic. Annals of tourism research, 89, 103076.

[9] Duro, J. A., Perez-Laborda, A., Turrion-Prats, J., & Fernández-Fernández, M. (2021). Covid-19 and tourism vulnerability. Tourism Management Perspectives, 38, 100819.

[10] Gaynor, L. M., Kelton, A. S., Mercer, M., & Yohn, T. L. (2016). Understanding the relation between financial reporting quality and audit quality. AUDITING: A Journal of practice & Theory, 35(4), 1-22.

[11] Habib, A. M. (2023). Do business strategies and environmental, social, and governance (ESG) performance mitigate the likelihood of financial distress? A multiple mediation model. Heliyon, 9(7).

[12] Hasan, A., Aly, D., & Hussainey, K. (2022). Corporate governance and financial reporting quality: a comparative study. Corporate Governance: The International Journal of Business in Society, 22(6), 1308-1326.

[13] Hsu, Y.-L., & Yang, Y.-C. (2022). Corporate governance and financial reporting quality during the COVID-19 pandemic. Finance Research Letters, 47, 102778.

[14] Jamal, T., & Camargo, B. A. (2018). Tourism governance and policy: Whither justice? Tourism Management Perspectives, 25, 205-208.

[15] Kaawaase, T. K., Nairuba, C., Akankunda, B., & Bananuka, J. (2021). Corporate governance, internal audit quality and financial reporting quality of financial institutions. Asian Journal of Accounting Research, 6(3), 348-366.

[16] Klai, N., & Omri, A. (2011). Corporate governance and financial reporting quality: The case of Tunisian firms. International business research, 4(1), 158-166.

[17] Koijen, R. S., Moskowitz, T. J., Pedersen, L. H., & Vrugt, E. B. (2018). Carry. Journal of Financial Economics, 127(2), 197-225.

[18] Rahmatika, D. N., & Afiah, N. N. (2014). Factors influencing the quality of financial reporting and its implications on good government governance. International Journal of Buainwaa, Economics and Law, 5(1), 2289-1552.

[19] Škare, M., & Hasić, T. (2016). Corporate governance, firm performance, and economic growth–theoretical analysis. Journal of Business Economics and Management, 17(1), 35-51.

[20] Wijerathna, H. S., Anuradha, N., & Ajward, R. (2024). Do selected board governance mechanisms strengthen the link between institutional and macroeconomic variables and the financial flexibility of corporations? Empirical evidence from an emerging economy. Journal of Asia Business Studies, 18(2), 412-429.

[21] Wu, W., Alkaraan, F., & Le, C. (2023). The moderating effects of corporate governance and investment efficiency on the nexus between financial flexibility and firm performance. Journal of Financial Reporting and Accounting.

[22] Yüksel, F., Bramwell, B., & Yüksel, A. (2005). Centralized and decentralized tourism governance in Turkey. Annals of tourism research, 32(4), 859-886.