The impact of internal governance mechanisms on the quality of information produced and disclosed by the company: the case of the SBF 120.

Summary The objective of this study is to investigate the impact of internal governance mechanisms on two aspects of accounting policy: production and diffusion. More precisely, we seek to verify whether the characteristics related to the board of directors, the ownership structure and finally whether employee shareholding (notably through its representation on the board of directors) have an impact on the quality of the information produced and disseminated by the firm. The results obtained from a sample of all industrial and commercial companies in the SBF 120 index between 2002 and 2007 seem to indicate that the effectiveness of the board of directors in improving the quality of the information produced by the company is linked to the increased size of this body as well as to the creation of an audit committee within it. The quality of financial communication has been improved by the creation of a nomination committee within the board. Concerning the ownership structure, the hypothesis of the expropriation of minority shareholders by the controlling shareholders is not corroborated. The presence of institutional investors in the capital of French companies improves the quality of communication. Nevertheless, this presence increases the practice of managing accounting data. In addition, the control exercised by French institutional investors is more effective. Finally, the presence of employees on the board of directors contributes to the effectiveness of the control exercised by this body in the production of accounting information.