Examining the Influence of Corporate Governance Components on the Tone and Readability of Financial Reporting in the Tehran Stock Exchange

Abstract

The primary objective of the present study is to examine the influence of corporate governance components on the tone and readability of financial reporting among firms listed on the Tehran Stock Exchange. In this study, corporate governance mechanisms including managerial ownership, institutional ownership, family ownership, board size, board independence, board gender diversity, audit committee independence, frequency of audit committee meetings, and audit committee size are considered as the independent variables. The tone and readability of financial reporting are examined as the dependent variables. The statistical sample consists of 125 firms observed over a seven year period from 2019 to 2025. Data analysis is conducted using multiple regression analysis. The results related to the first hypothesis indicate that institutional ownership, board independence, and audit committee independence have a positive and statistically significant effect on the tone of financial reporting, while managerial ownership and family ownership exhibit a negative and statistically significant association with reporting tone. The findings related to the second hypothesis show that the frequency of audit committee meetings, board independence, and audit committee independence have a positive and statistically significant effect on the readability of financial reporting, whereas managerial ownership and family ownership are negatively and significantly associated with financial reporting readability.