The mediating effect of financial restatement on corporate governance and investor confidence of publicly listed firms in the Philippine Stock Exchange index
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ID: 284537
2023
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Abstract
The Philippine Stock Exchange Index (PSEi) represents the top actively traded stocks in the Philippines, playing a significant role in the country's economy. Safeguarding these companies from risk by improving investor relationships is therefore important. This can be done by implementing good corporate governance. The presence of financial restatements affects investor confidence as the correction of errors may be viewed either positively or negatively by stockholders, and is influenced by corporate governance through internal controls. No specific study on the matter has isolated the effect of such, particularly in firms listed under the PSEi; hence, this is the research gap this study aims to fill.
The mediating analysis utilized Structural Equation Modeling (SEM) with the use of panel data acquired from the thirty publicly listed firms in the PSEi from the period 2014 to 2021. Corporate governance was measured using the Governance score derived from the ESG Score. Financial restatement occurrences were extracted from the PSE EDGE portal, while investor confidence was based on the Investor Sentiment Index (ISI), derived from historical stock prices. The findings of the study revealed that financial restatements do not mediate the relationship between corporate governance and investor sentiment, possibly due to less sophisticated retail investors in the Philippines, where corporate governance implementation may be inadequate, and financial restatements have minimal impact on firm value and investor sentiment.
Despite insignificant statistical findings, the study yields valuable insights for PSEi companies, regulatory bodies, investors, and future researchers. Future researchers are advised to broaden the study's scope with larger samples, additional variables, and industry-specific investigations to deepen the understanding of corporate governance, financial restatement, and investor confidence.
Key words: Corporate Governance; Financial Restatements; Investor Sentiment
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| Authors | Valenzuela, Mary June B. |
| Journal | Malay Journal |
| Year | 2023 |
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| Keywords | Keywords not found |
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