Accounting Theories and Corporate Governance

This assignment examines the impact of corporate governance and intellectual capital on firm performance and CSR disclosure, drawing on research from Australian listed companies. It analyzes the role of various theories, including stakeholder theory, legitimacy theory, and agency theory, in understanding the relationship between these factors. The assignment also includes a personal reflection on the findings and the importance of corporate governance in today's competitive environment.

Accounting Theories

Relevance to Article
Corporate Governance helps in enhancing the financial performance of firms and also
assists in disclosing the Corporate Social Responsibilities (CSR) activities outcomes in context
with Stakeholder and Agency theory as well. Aslam and et.al., (2018) carry out the research in
order to know whether corporate social responsibility' disclosure and financial performance of
firms is influence by corporate governance and intellectual capital or not. To answer this
question, researchers accumulated data from all Australian firms listed at Australian Stock
Exchange for year 2014. Any organisation engages in CSR activity due to numerous reasons and
it was difficult for researchers to elaborates the impact of Corporate Governance and Intellectual
Capital on CSR activities by utilising single theory. Thus, they selected four theory which were
legitimacy theory, agency theory, resource based view theory and stakeholder theory.
Researchers in the articles investigated the influence of intellectual capital and corporate
governance and CSR disclosure in line of ASX listed companies. For this 1456 ASX listed
organisations have been selected whose annual reports were presented on electronic medium and
which provides information about corporate governance structure. Corporate Social
Responsibility is attached to Corporate Governance (Aslam and et.al., 2018.). By being
transparent and disclosing each and every principal of Corporate Governance enhances the firm's
ability to perform CSR and will also eventually improves its financial performance. Stakeholder
theory and legitimacy theory are two core perspective on the relationship of CG and CSR
disclosures. As stakeholder theory involves various stakeholders associated with the firm and
legitimacy theory concerend about the whole society thus, these theory helps in explaining the
impact of CG and intellectual capital disclosures on Australian firms financial performance and
CSR activities.
Personal Reflection
Corporate Governance and Intellectual Capital impacts greatly firms financial performance and
corporate social responsibility disclosure. I believe that in order to sustain effectively in present
competitive environment it is essential that management disclose principals of corporate
governance explicitly. In the article I found that researchers succinctly carry out their research in
which they formulated hypothesis on the basis of four theories. Disclosure of intellectual capital
in the financial statement is now become significant for firms in order to develop value of the
organisation. From the viewpoint of authors value creations through traditional capital is not
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effective and firms needs to inter-relate the role played by humans and relational capital in order
to make the firm's corporate governance structure more robust. Theories such as agency theory,
legitimacy theory, stakeholder theory and resource based view theory assists in providing greater
understanding and relationship between firms intellectual capital and corporate governance. I can
say that corporate governance and its elements have been utilised numerous time to check the
association with CSR practices. Though there is no comprehensive model which would fit for
corporate governance and corporate social responsibility system. Intellectual capital systems are
already system of corporate governance and it becomes increasingly an area of research.
Although no precise definition has been proposed for intellectual capital.
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REFERENCES
Books and Journals
Aslam, S. and et.al., 2018. The Impact of Corporate Governance and Intellectual Capital on
Firm's Performance and Corporate Social Responsibility Disclosure: Evidence from
Australian Listed Companies. Pakistan Journal of Commerce & Social Sciences, 12(1).
Retrieved from:
https://www.researchgate.net/publication/324899517_The_Impact_of_Corporate_Governa
nce_and_Intellectual_Capital_on_Firm's_Performance_and_Corporate_Social_Responsibi
lity_Disclosure_Evidence_from_Australian_Listed_Companies.
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